Thinking about buying an electric vehicle? The Inflation Reduction Act provides new incentives for purchasing electric vehicles beginning on January 1, 2023. A credit of up to $7500 will be available to taxpayers who purchase certain new electric vehicles and hybrids. A credit of up to $4000 will be available to taxpayers purchasing a used electric vehicle. Which taxpayers and which vehicles qualify is complicated and will remain uncertain until the Treasury Department issues proposed rules later this year.
What is known is that in order to qualify for the credit a new electric sedan cannot have a price above $55,000 and pickup trucks, SUVs and vans cannot have a price over $80,000. Vehicles must be purchased from a dealer, not a private party. There are also requirements related to where the vehicle is made and where the batteries are produced. Additionally, the credit for new electric vehicles will only be available to taxpayers with adjusted gross income below certain levels - $150,000 for single taxpayers, $300,000 for those filing jointly and $225,000 for those filing as head of household.
Used electric vehicles must cost less than $25,000, must be at least two years old and must be purchased from a dealer, not a private party, to qualify for the credit. There are no requirements related to where the vehicle was made or where the batteries were produced. Eligibility for the credit is also based on adjusted gross income below certain levels - $75,000 for single taxpayers, $150,000 for those filing jointly and $112,500 for those filing as head of household.
For new cars purchased in 2023 the credit is based on the make and model and will be claimed on 2023 tax returns filed in 2024. Starting in 2024 the credit can be transferred to a dealership to lower the vehicle purchase price but eligibility for the credit will be reconciled on the 2024 tax return in 2025.
For used cars the credit will be 30% of the purchase price, up to a limit of $4000. For used cars purchased in 2023 the credit will be claimed on 2023 tax returns filed in 2024. Starting in 2024 the credit can be transferred to a deanship to lower the vehicle purchase price but eligibility for the credit will be reconciled on the 2024 tax return.
THESE ARE NON REFUNDABLE CREDITS. That means the credit is used to reduce the amount of tax owed in the year the vehicle is purchased. If the credit is greater than the tax owed, the balance does not carry forward into the next year.
Until the Treasury Department issues regulations later this year, taxpayers should be cautious about purchasing a vehicle to take advantage of these credits as there are still so many unknowns.
What is known is that in order to qualify for the credit a new electric sedan cannot have a price above $55,000 and pickup trucks, SUVs and vans cannot have a price over $80,000. Vehicles must be purchased from a dealer, not a private party. There are also requirements related to where the vehicle is made and where the batteries are produced. Additionally, the credit for new electric vehicles will only be available to taxpayers with adjusted gross income below certain levels - $150,000 for single taxpayers, $300,000 for those filing jointly and $225,000 for those filing as head of household.
Used electric vehicles must cost less than $25,000, must be at least two years old and must be purchased from a dealer, not a private party, to qualify for the credit. There are no requirements related to where the vehicle was made or where the batteries were produced. Eligibility for the credit is also based on adjusted gross income below certain levels - $75,000 for single taxpayers, $150,000 for those filing jointly and $112,500 for those filing as head of household.
For new cars purchased in 2023 the credit is based on the make and model and will be claimed on 2023 tax returns filed in 2024. Starting in 2024 the credit can be transferred to a dealership to lower the vehicle purchase price but eligibility for the credit will be reconciled on the 2024 tax return in 2025.
For used cars the credit will be 30% of the purchase price, up to a limit of $4000. For used cars purchased in 2023 the credit will be claimed on 2023 tax returns filed in 2024. Starting in 2024 the credit can be transferred to a deanship to lower the vehicle purchase price but eligibility for the credit will be reconciled on the 2024 tax return.
THESE ARE NON REFUNDABLE CREDITS. That means the credit is used to reduce the amount of tax owed in the year the vehicle is purchased. If the credit is greater than the tax owed, the balance does not carry forward into the next year.
Until the Treasury Department issues regulations later this year, taxpayers should be cautious about purchasing a vehicle to take advantage of these credits as there are still so many unknowns.
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