Thinking about buying a new vehicle in 2023 or later? Exciting credits await you! These new incentives not only save you money but also benefit the environment. You may qualify for a clean vehicle tax credit if you place in service a plug-in electric vehicle (EV) or fuel cell vehicle (FCV) in 2023 or after. Your seller must provide you with information about the qualifications of your vehicle at the time of sale. They must also register online and report the same information to the Internal Revenue Service (IRS).
Here's everything you need to know about these game-changing credits.
Eligibility Requirements:
To qualify for the credits, you must purchase a qualifying new vehicle from a certified dealer within the specified timeframe. Factors such as the type of vehicle (electric, hybrid, etc.) and its energy efficiency rating affect the credits. Income limitations may apply, so review the criteria carefully to ensure eligibility.
If you purchase a new, qualified plug-in electric vehicle or fuel cell electric vehicle (FCV) between 2023 and 2032, you may qualify for a credit of up to $7,500 under Internal Revenue Code Section 30D.
Both the Individuals and businesses can apply for the credit.
To qualify, you must:
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Buy the vehicle for your own use and it should not be purchased for resale.
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Use the vehicle primarily in the United States.
Additionally, your modified adjusted gross income (AGI) may not exceed:
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For married couples filing jointly, limit of $300,000
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For heads of households, limit of $225,000
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For all other filers, limit of $150,000
If your modified AGI is below the threshold in the year of delivery of the vehicle or the prior year, you can claim the credit.
Types of Credits:
Federal electric vehicle tax credits reduce the overall cost of eligible electric vehicles. State-level incentives, like rebates or discounts, vary by state and further provide benefits for low-emission or fuel-efficient vehicles. Some manufacturers offer their own credits or discounts to attract environmentally conscious buyers.
1. Vehicles placed in service from January 1 to April 17, 2023:
- Base amount of $2,500
- For vehicles with a battery capacity of at least 7 kilowatt hours, add $417
- Additional $417 per kilowatt hour of battery capacity over 5 kilowatt hours
- Total of $7,500
2. Vehicles placed in service after April 18, 2023:
- The vehicle must meet all the criteria listed above, plus meet two new requirements for critical mineral and battery components to claim the full credit of $7,500. If only one requirement is met, partial credit will be allowed for the purchase of vehicle.
Claiming Process:
After purchasing an eligible vehicle, keep all relevant documentation handy, including proof of purchase and vehicle specifications. Follow IRS or state authority procedures for claiming the credits, which may involve filling out forms or providing additional information when filing taxes. Timely submission is crucial for successful credit availing.
