The IRS issued updated guidance as it relates to the new clean vehicle credit. Effective April 18, the new requirements state: “if you take possession of a new clean vehicle on or after April 18, 2023, it must meet critical mineral and battery component requirements to qualify for the tax credit. This applies even if you bought the vehicle before April 18.”
Requirements to Qualify for Tax Credits
The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles purchased from 2023 to 2032.
If you bought and placed in service a new qualified plug-in electric vehicle (EV) or fuel cell vehicle (FCV) on January 1, 2023 or later and meet certain income limitations, you may be eligible for a clean vehicle tax credit up to $7,500 under Internal Revenue Code Section 30D.
The maximum credit of $7,500 per vehicle consisting of $3,750 related to critical minerals and $3,750 related to battery components.
To meet the critical mineral requirement, 40% (in 2023) of the value of the critical minerals contained in the battery must be extracted or processed in the United States, a free trade agreement country, or be recycled in North America.
To meet the battery component requirement, 50% (in 2023) of the value of the battery components must be manufactured or assembled in North America. The critical mineral and battery component requirements will apply to vehicles placed in service on or after April 18, 2023.
The credit is available to individuals and their businesses.
To qualify, you must:
- Buy it for your own use, not for resale
- Use it primarily in the U.S.
In addition, your modified adjusted gross income (AGI) may not exceed:
- $300,000 for married couples filing jointly
- $225,000 for heads of households
- $150,000 for all other filers
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 one of the two years, you can claim the credit.
The credit is nonrefundable, so you can’t get back more on the credit than you owe in taxes. You can’t apply any excess credit to future tax years.
List of Qualifying Vehicles
The IRS has compiled a list of manufacturers and vehicle models purchased in 2023 that are eligible for the New Qualified Clean Vehicles credit. To review the 2023 list, please click here. For manufacturers and models purchased in 2022 and before, click here.
Please note that some manufacturers have entered into a written agreement to become a “qualified manufacturer” but hasn’t yet submitted a list of specific makes and models that are eligible. If your vehicle model is not listed, please check back to the IRS website for updates, or to check if a specific make and model meets the critical mineral and battery components, visit Fuel Economy.gov.
Should you have questions about this topic, or any other topics related to your personal or business situation, please contact us at any time.
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