Are there tax benefits for electric vehicles?

The clean vehicle credit, formerly known as the tax credit for plug-in electric powered vehicles, is still available and capped at a maximum of $7,500. The credit has been extended through 2032 under IRC section 30D. However, the credit has been reworked in several ways that consumers should take note of:

  • The 200,000-vehicle limit for manufacturers has been eliminated, starting in 2023. This means that popular car brands like GM, Tesla, and Toyota that had reached this sales threshold may still be eligible for the credit in 2023, subject to other rules.
  • A "final assembly requirement" is now in place for vehicles purchased after August 16, 2022. The final assembly must occur in North America. The Department of Energy has published a list of Model Year 2022 and early Model Year 2023 vehicles that meet this requirement. The IRS has also provided guidance on how this requirement applies to 2022 vehicle purchases.
  • In 2023, only vehicles with a purchase price of $80,000 or less for SUVs and vans, or $55,000 for other vehicles, are considered qualified purchases.
  • Starting in 2023, there is an income cap on purchasers. Married filing jointly and qualifying widows have a modified adjusted gross income (MAGI) limit of $300,000, heads of households have a limit of $225,000, and all other filers have a limit of $150,000.
  • The clean energy vehicle credit may be claimed for the purchase of a used vehicle in 2023, but there are notable differences in the credit. The maximum credit is the lesser of 30% of the purchase price or $4,000. The credit may only be claimed once every three years, and the vehicle's sale price cannot exceed $25,000. MAGI limits also apply to taxpayers claiming the credit for used vehicles.
  • In 2024, taxpayers can transfer the credit to a dealer, effectively reducing the purchase price, instead of waiting to claim the credit when the return is filed.
  • Individuals may also qualify for the alternative fuel refueling property credit for installing charging stations in their homes. This credit runs through 2032 under IRC section 30C, and the credit amount is the lesser of 30% of the cost of the property or $1,000.

It's important to stay informed about these changes to the clean vehicle credit to make the most of the available incentives. Make sure to check your eligibility and speak with a qualified tax professional to take advantage of these credits.

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