The recently signed Inflation Reduction Act included a lot of green provisions. Today I want to talk about the electric vehicle credits as they were expanded.
HOW DOES THE CREDIT WORK RIGHT NOW?
- For the last number of years, including 2022, the credit was up to $7,500 depending on the vehicle purchased. But the number of qualifying vehicles were phased-out depending on how many were sold. So cars like Tesla and other manufacturers cars were not eligible for the credit.
WHEN DO THE NEW RULES TAKE EFFECT?
- Most of the rules are effective as of January 1, 2023. One exception is for a new requirement that final assembly must take place in the United States for vehicles purchased after August 16, 2022.
DID THE AMOUNT OF THE CREDIT CHANGE IN 2023?
- The amount of the credit did not change, it is still $7,500, but how it is calculated did change. The new calculation is complicated since it has to do with the materials in the battery. In most cases, you will want to work with the dealership to see if the vehicle qualifies for the credit.
IS THERE STILL A PHASE-OUT BASED ON NUMBER OF VEHICLES SOLD?
- No the 200,000 cars per manufacturer limit was removed as of 2023. So Tesla’s are back in play.
CAN ANYONE TAKE THE CREDIT?
- In the past, as long as the vehicle qualified, a person could get the credit. Effective in 2023, there are income limitations in order to get the credit. The adjusted gross income limitation is $300,000 for married couples and $150,000 for single individuals.
- The second limitation added for 2023 is that the vehicle’s sticker price has to be below certain amounts ($80k for vans, SUVs and trucks).
- Lastly, unlike in prior years, a person can only claim one credit per year. In the past, you could get multiple credits per year.
IN THE PAST, I HEARD THAT PEOPLE BUYING GOLF CARTS GOT THE CREDIT. IS THIS STILL TRUE?
- No, this was changed a number of years ago. The term motor vehicle means any four-wheeled vehicle manufactured primarily for public roads. It specifically does not include low-speed vehicles that is primarily made for off-road use, such as UTVs, ATVs and golf carts.
Be sure to talk to one of our professionals if you have any questions about the Electric Vehicle Credits.
As a partner, I have thorough experience providing tax services to individuals, privately held businesses, nonprofit entities and estates and trusts. I also provide compilation and review services.
