IRS announces tax credits for new vehicles in 2023 and beyond
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The Internal Revenue Service (IRS) has announced that taxpayers who purchase a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) in 2023 or later may be eligible for a clean vehicle tax credit. The credit can be up to $7,500 under Internal Revenue Code Section 30D and is available to individuals and their businesses who buy it for their use, not for resale, and primarily use it in the U.S.
To qualify for the credit, your modified adjusted gross income (AGI) may be, at most, $300,000 for married couples filing jointly, $225,000 for heads of households, or $150,000 for all other filers. The credit is nonrefundable, meaning you can't get back more on the credit than you owe in taxes, and you can't apply any excess credit to future tax years.
The amount of the credit depends on when you placed the vehicle in service, regardless of the purchase date. The minimum credit for vehicles placed in service from January 1 to April 17, 2023, will be $3,751. The credit amount for vehicles placed in service after April 18, 2023, will depend on whether the vehicle meets critical mineral and battery component requirements.
To qualify for the credit, a vehicle must have a battery capacity of at least 7-kilowatt hours, a gross vehicle weight rating of fewer than 14,000 pounds, and be made by a qualified manufacturer. FCVs are not required by a qualified manufacturer to be eligible.
Sellers are required to report your name and taxpayer identification number to the IRS for you to be eligible to claim the credit, and the vehicle's manufacturer suggested retail price (MSRP) can't exceed $80,000 for vans, sport utility vehicles, and pickup trucks, or $55,000 for other vehicles.
Strict guidelines only allow six vehicles
The IRS released a list of electric vehicles that still qualify for the full $7,500 federal tax credit after strict new guidelines were announced back in March, with just six EVs now qualifying under the new terms. The list includes the Cadillac Lyriq, Chevy Bolt, Chevy Bolt EUV, some Tesla Model 3 versions, some Tesla Model Y versions, and Ford F-150 Lightning. Other EVs, such as the Nissan Leaf and Volkswagen ID.4, will no longer qualify for the full credit.
The updated rules pertain to EV batteries and cut out China as an approved trading partner, which means that many electric vehicles lose the full credit moving forward as most electric vehicles use batteries manufactured in China or by Chinese companies. Therefore, checking the full list before zeroing in on your next car purchase is essential.
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