On December 29, 2022, the Internal Revenue Service (IRS) announced that an amendment had been made to the Clean Vehicle Credit that was established in August of 2022. These updates clarify the qualifications and requirements that clean vehicle owners need to meet if they want to take advantage of this tax credit. To save you time, we’ve put together this nifty little blog with an overview about what changes were made and also included resources from the IRS for additional information.
Change Takeaways
Vehicles purchased between 8/17/2022 – 12/31/2022
- Now includes fuel cell electric vehicles (FCVs)
- Dealer must provide tax documents to the customer at the time of sale***
- Vehicle might not qualify if it was produced by a manufacturer with a 200,000 unit cap for Clean Vehicle Credits – verify manufacturer here.
- Final assembly must be completed in North America (Canada, US, Puerto Rico, & Mexico)
- Determine if your vehicle went through final assembly in North America by using the IRS VIN decoder here.
- Read further information about qualified EVs that were purchased within these dates here
New vehicles purchased from 1/1/2023 onward
- Now includes fuel cell electric vehicles (FCVs)
- Battery must be at least 7 kilowatt hours**
- Gross vehicle weight must be less than 14,000 lbs
- Customer must be within the stated income limits*
- Dealer must provide tax documents to the customer at the time of sale***
- Must be produced by a qualified manufacturer with final assembly in North America (Canada, US, Puerto Rico, & Mexico)
- Find out if your new EV qualifies here
- Must be within MSRP limitations
- $80,000: SUVs, vans, and pickup trucks
- $55,000: All other clean vehicles
Previously owned vehicles purchased from 1/1/2023 onward
- Now includes fuel cell electric vehicles (FCVs)
- Battery must be at least 7 kilowatt hours
- Gross vehicle weight must be less than 14,000 lbs
- Must costs less than $25,000
- Credit will be 30% of sale price, up to $4,000
- Must be at least 2 years older than the year it was purchased (ex: Vehicle purchased in 2023, must be a 2021 model, or older)
- Find out if your previously owned EV qualifies here
- To claim credit, you cannot have another used EV or FCV claimed for the clean vehicle credit within 3 years before purchase date
We know that change can sometimes be scary, but as long as we keep informed, it doesn’t have to be! Keep reading to learn more about the items listed above with asterisks at the end of them. Again, we’ve included resources straight to the IRS websites for your convenience.
* Income Limitations
Income limitations are based on Adjusted Gross Income (AGI). The easiest way to find your AGI is to take line 11 on Form 1040 and ADD
- Any amount from line 45 or line 50 on Form 2555 (Foreign Earned Income)
- Any amount sourced from Puerto Rico or American Samoa that was excluded from gross income
Adjusted Gross Income Limits New Clean Vehicles
- $300,000: Married, filing jointly, or as a surviving spouse / qualifying widow(er)
- $225,000: Head of household
- $150,000: All other taxpayers
Adjusted Gross Income Limits Previously Owned Clean Vehicles
For previously owned clean vehicles, you can use modified AGI from the previous year or the year before you accepted the delivery of your vehicle (whichever is less). If the income is below the threshold for 1 of the 2 years, you can proceed to claim the credit.
- $150,000: Married, filing jointly, or as a surviving spouse / qualifying widow(er)
- $112,500: Head of household
- $75,000: All other taxpayers
**7 Kilowatt Hour Battery Requirement
The requirement for battery power has been raised for vehicles purchased after 12/31/2022. This new qualification currently helps those who own an EV with a 7 kilowatt hour battery, or better, get a minimum base credit of $3,751!
| Credit Amount | Qualification | Details |
|---|---|---|
| $2,500 | Own an EV | Base credit |
| $417 | 7 KWh capacity battery | Minimum of 7 kilowatt hour capacity battery |
| $417 | Over 5 KWh capacity battery | Additional credit added for every kilowatt over 5 hour capacity |
| $7,500 | Own an EV | Credit limit |
It’s important to remember that these credits are nonrefundable and they cannot be rolled over into future tax years.
***Tax Documents Provided by Dealer
The dealer will provide documentation for your EV at the time of sale. This official document is important because you will need it to apply for the Clean Vehicle Credit. The document will contain the following information:
- Name and taxpayer identification number of the seller
- Name and taxpayer identification number of the taxpayer
- Vehicle identification number of the new clean vehicle (VIN)
- Battery capacity of the new clean vehicle
- Verification that the taxpayer is the original user of the new clean vehicle
- The date of the sale and the sales price of the vehicle
- Maximum credit allowable for the new clean vehicle being sold
- A declaration under penalties of perjury from the seller
- For sales after December 31, 2023, the amount of any transfer credit applied to purchase
The IRS plans to make more amendments to the Clean Vehicle Credit in March of 2023. One of the possible changes for the future is that the batteries cannot be sourced from “foreign entities of concern,” like Russia, China, etc. Until that change happens, feel free to use our blog as a helpful reference for the Clean Vehicle Tax Credit! We will save you time from searching the web and keep you informed of future amendments on this credit.
For more information about the New Clean Vehicle Tax Credit, click here.
For additional information about the Used Clean Vehicle Tax Credit, click here.
