If you purchased a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) in 2023 or later, you might be eligible for a clean vehicle tax credit. This incentive aims to make eco-friendly transportation more accessible. For detailed eligibility criteria, refer to Publication 5866, New Clean Vehicle Tax Credit Checklist PDF provided by the IRS.
It’s crucial to ensure that at the point of sale, the vehicle seller provides you with all necessary qualification details. Furthermore, sellers are mandated to register online with the IRS and report this information. Non-compliance from the seller can render your vehicle ineligible for the tax credit. More information can be found in Publication 5905, Information for Consumers Purchasing a New or Used Clean Vehicle PDF.
For those interested in exploring other clean vehicle incentives, information is available on credits for used clean vehicles, qualified commercial clean vehicles, and new plug-in EVs bought before 2023.
Who Qualifies for the Plug-In EV Tax Credit?
You, as an individual or business, may qualify for a tax credit up to $7,500 under Section 30D of the Internal Revenue Code when you purchase a new, qualifying plug-in EV car or fuel cell electric vehicle (FCV). The Inflation Reduction Act of 2022 brought significant changes to the rules governing this credit for vehicles acquired between 2023 and 2032.
Eligibility Criteria
To be eligible for this clean vehicle tax credit, you must meet several requirements:
- The plug-in EV car must be purchased for your personal use and not for resale purposes.
- The vehicle must be used primarily within the United States.
Income Limits
Additionally, your modified Adjusted Gross Income (AGI) must not exceed certain thresholds to qualify for the plug-in EV car tax credit:
- $300,000 for those married filing jointly or qualifying widow(er).
- $225,000 for heads of households.
- $150,000 for all other filing statuses.
You can utilize your modified AGI from either the year you take delivery of the plug-in EV car or the preceding year, whichever is lower. If your modified AGI falls below the stipulated threshold in either of these years, you are eligible to claim the credit.
It’s important to note that unless you decide to transfer the credit to an eligible entity at the point of sale, this clean vehicle credit is nonrefundable. This means the credit amount cannot exceed your tax liability, and any excess credit cannot be carried forward to future tax years.
Understanding the Clean Vehicle Credit Amount
The amount of the clean vehicle tax credit you can receive is determined by the date the vehicle was placed in service (delivery date), irrespective of when it was purchased.
Credit for Vehicles Placed in Service January 1 to April 17, 2023
For plug-in EV cars placed in service during this period, the credit calculation is as follows:
- Base amount: $2,500
- Additional $417 for vehicles with at least 7 kilowatt-hours of battery capacity.
- Further $417 for each kilowatt-hour of battery capacity exceeding 5 kilowatt-hours.
- The total credit is capped at $7,500.
Generally, for a plug-in EV car with the minimum 7 kilowatt-hours of battery capacity, the minimum credit amount is $3,751 ($2,500 + 3 times $417).
Credit for Vehicles Placed in Service On or After April 18, 2023
For plug-in EV cars placed in service on or after April 18, 2023, the eligibility criteria remain the same, but new critical mineral and battery component requirements are introduced. To receive the clean vehicle tax credit, the vehicle must meet these new standards:
- $3,750 credit if the vehicle meets only the critical minerals requirement.
- $3,750 credit if the vehicle meets only the battery components requirement.
- $7,500 credit if the vehicle meets both the critical minerals and battery components requirements.
Plug-in EV cars that fail to meet either of these requirements will not qualify for any clean vehicle tax credit.
Qualified Plug-In EV Cars: Key Requirements
Go to fueleconomy.gov to check if a specific vehicle qualifies for the new clean vehicle credit.
To be deemed a qualified vehicle and thus eligible for the clean vehicle tax credit, a plug-in EV car must fulfill several criteria:
Vehicle Requirements
- Battery Capacity: Must have a battery capacity of at least 7 kilowatt-hours.
- Weight Limit: The gross vehicle weight rating (GVWR) must be less than 14,000 pounds.
- Qualified Manufacturer: Must be manufactured by a qualified manufacturer.
- North American Assembly: Must undergo final assembly in North America.
- Component Standards: Must meet critical mineral and battery component requirements (effective from April 18, 2023).
Purchase and Seller Requirements
- New Vehicle Purchase: You must purchase the plug-in EV car new.
- Seller Reporting: The seller is obligated to report necessary information to you at the time of sale and to the IRS.
MSRP Limits
Furthermore, the manufacturer’s suggested retail price (MSRP) for qualifying plug-in EV cars cannot exceed:
- $80,000 for vans, sport utility vehicles, and pickup trucks.
- $55,000 for other vehicle categories.
MSRP is defined as the retail price recommended by the manufacturer, including factory-installed options, accessories, and trim, but excluding destination fees. It’s important to remember that MSRP is not necessarily the final price you will pay for the vehicle.
You can typically find details regarding your vehicle’s weight, battery capacity, final assembly location (listed as “final assembly point”), and VIN on the vehicle’s window sticker.
How to Claim Your Plug-In EV Tax Credit
To claim the clean vehicle tax credit for your plug-in EV car, you will need to file Form 8936, Clean Vehicle Credits with your annual tax return. Ensure you have your vehicle’s VIN readily available when completing the form.
Get a Time-of-Sale Report
Upon completing the purchase of your plug-in EV car, the dealer should provide you with a paper copy of a time-of-sale report.
- Keep this document for your records. It serves as confirmation that the dealer has reported the transaction to the IRS on the date of purchase.
- If you do not receive a copy, you should consult the step-by-step guide for further instructions.
File Form 8936 with Your Tax Return
You are required to file Form 8936 when you file your tax return for the year in which you took delivery of the plug-in EV car. This applies whether you transferred the credit at the time of sale or plan to claim it when filing your taxes.
For any questions or concerns, refer to the comprehensive step-by-step guide for detailed assistance.
Related Resources
For further information on related tax credits and incentives, you may find the following resources helpful:
