The Inflation Reduction Act of 2022 (IRA) changed the Clean Vehicle Tax Creditfor qualified plug-in electric drive motor vehicles, including adding fuel cell vehicles.
Before purchasing a clean vehicle, we encourage you to confirm the following items to ensure it qualifies for a tax credit:
- Qualified Manufacturer – was the vehicle made by a qualified manufacturer who has entered into an approved agreement with the IRS and supplied valid Vehicle Identification Numbers (VINs) to the IRS, which must be matched with the VIN reported on the taxpayer’s return.
- Make and Model – check if the make and model are eligible for the credit. There are specific battery and kilowatt-hour capacities that must be met to qualify for this credit. The seller must provide the buyer with a seller report verifying the vehicle will qualify for the credit. This report should include the make, model, and VIN, and is needed for reporting the credit on the taxpayer’s return.
- Cost of the vehicle – The vehicle manufacturer’s suggested retail price (MSRP) cannot exceed $80,000 for Vans, Sport Utility Vehicles, and Pickup Trucks and $55,000 for other vehicles.
- Gross income limitation – a taxpayer may claim the credit if their adjusted gross income does not exceed, $300,000 for Married Filing Joint, $225,000 for Head of Household, and $150,000 for Single and Married Filing Separate filers.
The Clean Vehicle Tax Credits can be used in the year the vehicle is purchased and are non-refundable, meaning, it cannot be used to increase a taxpayer’s refund. These credits are not eligible to be carried forward, so you will want to ensure your tax liability will be at least the amount of the credit to capture the full credit.
