New electric vehicle credit

By David Zubler

Vehicles purchased in 2023 or after may qualify for a clean vehicle tax credit
of up to $7,500.
The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles
purchased from 2023 to 2032. You must buy the vehicle for your own
use and use it primarily in the U.S. to qualify for the clean vehicle tax credit.
Additionally, your modified adjusted gross income (AGI) may not exceed
$300,000 for married couples filing jointly, $225,000 for heads of households,
and $150,000 for all others. You can use your modified AGI from the
year you take delivery of the vehicle or the year before, whichever is less.
If your modified AGI is below the threshold in 1 of the two years, you can
claim the credit.
The amount of the credit depends on when you placed the vehicle in service
(took delivery), regardless of the purchase date.
For vehicles purchased from January 1 to April 17, the credit is:
$2,500 base amount
Plus, $417 for a vehicle with at least 7-kilowatt hours of battery capacity
Plus, $417 for each kilowatt hour of battery capacity beyond 5-kilowatt
hours
With a maximum credit of $7,500
For vehicles purchased after April 18, the credit is:
$3,750 If the vehicle meets the critical minerals requirement only
$3,370 If the vehicle meets the battery components requirement only
$7,500 If the vehicle meets both of the two above requirements
You must buy the vehicle new, and the seller must report the required information
to you at the time of sale and to the IRS. The vehicle’s manufacturer
suggested retail price (MSRP) can’t exceed $80,000 for vans, SUVs, and
pickup trucks, and $55,000 for other vehicles.
To qualify, a vehicle must:
Have a battery capacity of at least 7-kilowatt hours
Have a gross vehicle weight of less than 14,000 pounds
Be made by a qualified manufacturer
You can find your vehicle’s weight, battery capacity, final assembly location
(listed as “final assembly point”), and VIN on the vehicle’s window sticker.
The credit is nonrefundable, so you can’t get back more on the credit than
you owe in taxes. Unfortunately, you can’t apply any excess credit to future
tax years.
Since several income tax return factors impact the credit and it’s a nonrefundable
credit, it may be a good idea to do some tax planning before you
purchase the vehicle, to determine the amount of your credit before buying
the vehicle.
Additional information can be found in the IRS Credits and Deduction Under
the Inflation Reduction Act of 2022.
David Zubler is a nationally known tax accountant and Enrolled Agent that
resides in East Tennessee. He is the author of six tax books and a syndicated
columnist who has shared tax advice on podcasts and national TV and has
been referred to as America’s Tax Guru. He is the founder and president of
Your Tax Care. He represents clients nationwide before the IRS and provides
tax strategies, and tax education, including David’s one-minute tax tip radio
recordings at YourTaxCare.com. David can be reached at (865) 363-3019 or
by email at david@yourtaxcare.com.