April 26, 2023
Are you considering purchasing a new electric vehicle? If so, you may be eligible for a federal tax credit that can help reduce the cost of your new ride. The federal tax credit for electric vehicles was established to encourage more people to switch to clean energy transportation, and it can provide a significant financial incentive for buyers.
But which electric vehicles still qualify for tax credits and how much is it worth? It depends on when the vehicle was placed in service, regardless of purchase date, and several other factors.
There were some changes to the requirements for electronic vehicle tax credits that people can claim when they purchase a new clean vehicle in April 2023. Before April 17, 2023, if you bought an electric vehicle, you could claim a tax credit of up to $7,500, depending on the battery size of the vehicle. However, after April 17, 2023, the maximum tax credit amount has been reduced to $3,750 if it meets only the critical mineral requirement, $3,750 if it meets the battery component requirements, and $7,500 if it meets both.
The credit will only apply to vehicles that have a retail price of less than $80,000 for vans, SUVs and trucks and $55,000 for other vehicles. The retail price is considered the manufacturer's suggested retail price (MSRP), not necessarily the price you pay. The seller must report the required information regarding the sale to the IRS at the time of purchase.
The battery capacity of the vehicle must be at least 7 kilowatt hours (kWh), and have a gross vehicle weight rating of less than 14,000lbs. The vehicle must be primarily designed to operate on the road, which means that it cannot be a golf cart or other type of off-road vehicle. Additionally, the vehicle must be new and not used for the above noted amounts. The vehicle must be acquired for use or lease by the taxpayer and not for resale. The final assembly of the vehicle must be in North America.
There are separate tax credit amounts for used electronic vehicles placed in service January 1, 2023 and later. To be eligible for this tax credit, you have to buy a qualified used EV or FCV from a licensed dealer for $25,000 or less. You may qualify for a tax credit that's equal to 30% of the sale price, up to a maximum of $4,000.(Tax Credits for Used Clean Vehicles)
Some of the vehicles that qualify for the federal tax credit as of this article include the Tesla Model 3, the Chevrolet Bolt, the Nissan LEAF, and the Ford Mustang Mach-E. However, it's important to note that the availability of the tax credit may change depending on legislative changes. The federal government provides a helpful link to help taxpayers determine if their purchase qualifies at https://fueleconomy.gov/feg/tax2023.shtml.
Whether you're considering purchasing an electric vehicle now or in the future, it's important to stay informed about the available tax credits and incentives. The federal tax credit can be a significant financial benefit, but it's not the only incentive available. Some states also offer additional tax credits or rebates for electric vehicle purchases, so be sure to check the requirements in your area.
For more information and specific details on the new requirements, you can refer to the IRS Fact Sheet on Credits for New Clean Vehicles Purchased in 2023 or After, which includes answers to frequently asked questions (FAQs) and can be found on the IRS website.