How to Claim the Clean Vehicle Tax Credit

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The EV or Clean Vehicle Tax Credit has been adjusted for recently purchased qualifying vehicles. This credit can be claimed for a qualifying electric plug-in vehicle, hybrid plug-in vehicle, or a fuel cell vehicle. To qualify for the new Clean Vehicle Credit and to claim the credit on your 2023 year return, the vehicle needs to have been purchased and placed into service before the end of the year in question.

To claim it on a previous year return or back taxes, the vehicle needs to be purchased and placed into service in the year you are claiming it. The IRS defines being placed into service as the date at which the purchaser takes delivery of the vehicle. See IRS Clean Vehicle Tax Credit information.

Note: To claim the Clean Vehicle Credit, purchases or buyers can get the credit at the point of sale from 2024 - 2032. Ask your dealer during the sale about your eligibility.

Latest IRS tax credit updates on electric vehicle purchases:

• What electric vehicles qualify for the Clean Vehicle Credit?
• Do hybrids qualify for the new Clean Vehicle Credit?
• How to claim the EV tax credit up front?

KEY TAKEAWAYS

• You can claim up to $7,500 for new, clean vehicles or $4,000 for used ones, depending on the vehicle's specifications and battery content.
• To qualify, the vehicle must be purchased and placed into service by the end of the year for which you're claiming the credit on your tax return.
• For new vehicles, the purchase price must be under $55,000 for cars and $80,000 for SUVs, trucks, and vans to qualify for the credit. See details in the table below.
• Your adjusted gross income (AGI) must be under $150,000 for singles, $225,000 for heads of household, or $300,000 for married couples to be eligible for the credit.
• Starting from 2024, you can apply for the credit at the point of sale, reducing the upfront cost of the vehicle directly, if your dealer participates.

Do I Qualify?

Let's find out if you qualify for the EV tax credit, simply.

A vehicle qualifies for a credit of up to $7,500 ($4,000 for used vehicles) depending on the critical materials used in building it and the amount of power the vehicle produced. Verify your vehicle in the table below.

Claim this credit if you are looking to buy a new clean vehicle, if you have already purchased a qualifying clean vehicle, if you are going to buy or have purchased a used clean vehicle, of if you are looking to buy a clean vehicle for your business. From 2024 through 2032, you can claim this credit at the point of purchase. Your seller must tell you about this credit and report all the details to the IRS - make sure they do this! Dealers or sellers, register below:

IRS Clean Vehicle Registration for Dealers

Clean Vehicle Tax Credit or EV Tax Credit

As part of the Inflation Reduction Act (IRA), the newly revised EV tax credit has been reintroduced with some enhancements, now being called the Clean Vehicle Credit instead of the much longer Plug-In Electric Drive Motor Vehicle Credit. Do you qualify? How much is it worth?

The EV tax credit is still worth up to $7,500 and will last through 2032. As many are noticing, due to inflation, there are currently few electric vehicles on the market which qualify for the credit due to the pricing restriction. Find more details below in the table before purchasing your next vehicle.

How to Claim the EV Tax Credit?

Attention: This page has a lot of information! Rather than comb through exhausting details in the IRS' latest 11,600 word document on this complicated tax credit, get your taxes on on eFile.com. After purchasing your new EV, add your details to your account and eFile will calculate your credit for you. Follow these simple steps to claim your EV tax credit:

1. Research, choose, and buy the right EV for you that fits the criteria - refer to table.
2. Retain documents, receipts, and all paperwork for the vehicle - the VIN is needed.
3. Get your full credit: make sure your dealer is signed up with the IRS to allow you to claim the credit at the point of sale. If not, you can claim it when you file your taxes.
4. Sign up for an eFile account and enter all your income and tax information.
5. Answer the questions regarding your EV purchase and enter the VIN or vehicle identification number.
6. eFile will reconcile the amount of the credit you received based on the amount you are eligible for. If you received this credit up front, you are required to file taxes.

Important: this credit is nonrefundable meaning you cannot be paid the full $7,500 if you are owed a tax refund or do not owe taxes. However, if you claim it when you buy the car up front, then it goes directly to the price of the car itself. If you do not claim the credit at the point of sale, we recommend withholding less in taxes or making less estimated tax payments so your return results in enough taxes due to use up your entire EV tax credit. Only do this for the year you purchased the vehicle, then revert back to normal withholding.

Get the details directly from the IRS:

• If you purchased in 2022 or before
• If you purchased during 2023 or after .

Tax Credit for Buying a New Electric Vehicle or EV

Can I claim a tax credit for buying a new Tesla? What about a new Hyundai electric car? What if I bought a used electric car?

There is a federal tax credit worth up to $7,500 that individuals can claim on their 1040 Return. This credit is also valid for many qualifying plug-in hybrid electric vehicles and fuel cell vehicles.

Related: How to invest in Tesla stocks and other passive income ideas.

Does the Electric Vehicle Tax Credit Run Out?

The credit needs to be claimed for the year which the vehicle was purchased. The tax credit does not carryover or carry forward if you do not use it; in other words, if you did not use the part of the personal portion of the EV tax credit, then the unused credit is lost. To claim the credit on eFile.com, you can prepare and eFileIT Form 8936, Clean Vehicle Credits along with Form 1040.

If you bought a qualifying vehicle in a recent year and you did not claim it on your tax return, you can still get the credit by filing an amended return. Claim this credit when filing your next tax return on eFile.com.

Vehicles that Qualify for the Clean Vehicle Credit

These vehicles are confirmed to qualify for the newly enhanced Clean Vehicle Credit. These vehicles need to be placed into service or delivered on or after April 18, 2023. This list is consistently updated as the IRS confirms vehicles.

How do you know if you qualify? If you are single and make under $150,000 in a year, head of household and make under $225,000, or married filing jointly making under $300,000, and you purchase a qualifying vehicle from the table below, you should qualify.

Important: Because the credit is supposed to be claimed at the point of sale, verify with your employer that the vehicle you are buying qualifies prior to purchasing. Your dealer must confirm that the specific vehicle qualifies and they must provide you with a time-of-sale report. Not every version of the model will be guaranteed to qualify.

Key: EV = electric vehicle; PEV - plug-in electric vehicle; PHEV = plug-in hybrid electric vehicle

In addition to this IRS credit, different states offer rebates to encourage taxpayers to invest in electric vehicles. For example, California offers an EV tax credit in the form of a cash rebate up to $7,000 for a taxpayer who purchases a new electric vehicle. This is the state's Clean Vehicle Rebate Program or CVRP which is good for plug-in hybrid vehicles, battery electric vehicles, and fuel cell electric vehicles.

Qualified Alternative Fuel Vehicle Refueling Property Credit

If you purchase and install a refueling property for individual use or for a business, you may be able to claim a tax credit via IRS Form 8911 if it is used to store or dispose clean-burning fuel. The property must be:

• Placed into service during the year in which you are claiming the credit
• Originally used by you or your business
• Used primarily in the United States
• Installed on property used as your main home if it is not for business or investment purposes.

This tax credit can be used for various properties, specifically including charging stations for two or three-wheeled vehicles as well as bidirectional charging equipment, also known as vehicle-to-grid or V2G. This means that, if you purchase a qualifying electric vehicle and also install a charger to fuel your vehicle on your property, you may be eligible for two federal taxes credits.

Only if you installed a qualifying property can you claim up to $100,000 for this credit, though it varies by the purpose of the property and how it will be treated:

• Property subject to depreciation can be claimed for 6% of purchase costs, up to $100,000.
• Property not subject to depreciation can be claimed for 30% of purchase costs, up to $1,000 per item.
• Most businesses can claim 30% of total costs, up to $100,000.

How Did the EV Tax Credit Change?

The details below summarize the important details of the newly changed tax credit for electric vehicles.

• As a qualified buyer, you will put the vehicle into service, not resell it, and you will only claim this credit once in a three-year period.
• The credit can be claimed for the return in which the vehicle was placed into service if not claimed up front (i.e. a vehicle purchased and driven this year will be reported on this year's tax return).
• The 200,000 vehicle cap was removed, thus certain Tesla and GM vehicles may qualify for the credit.
• To qualify for the EV tax credit, the vehicle:
  • Has an external charging source
  • Has a gross vehicle weight rating of less than 14,000 pounds
  • Has a minimum battery capacity of 7 kilowatt hours - increased from 5
  • Finished assembly in the U.S. - details below.
• A vehicle purchased after April 18, 2023 must also be assembled in North America and the critical materials for the battery must be from the U.S. or a country with whom the U.S. has a free trade agreement with. In general, North America includes the United States and Puerto Rico, Canada, and Mexico for purposes of determining the location of final assembly.
• To see if your vehicle meets the assembly requirements, check the Department of Energy's page on Electric Vehicles with Final Assembly in North America. On that page, you can:
  • Confirm the assembly location for your specific vehicle using the VIN Decoder tool under "Specific Assembly Location Based on VIN."
  • Check a list of qualifying electric vehicles under purchase date.
  • Because some models are built in multiple locations, you should check both criteria for any specific vehicle.
• The maximum MSRP or price of the vehicle must not exceed $55,000 for cars or $80,000 for SUVs, trucks, and vans. This means most Tesla vehicles will not qualify for the credit.
• To claim the credit, the purchaser's adjusted gross income cannot exceed $150,000 for the year for singles, $225,000 for heads of household, or $300,000 for married filing jointly to prevent wealthier Americans from taking advantage of additional tax savings.
• The credit is also for used electric vehicles through the Previously-Owned Clean Vehicles Credit, limited to $4,000 for cars priced at $25,000 or less. This has a lower income cap at $75,000 for singles, $112,500 for heads of household, or $150,000 for married couples.
  • The vehicle must be at least two years older than the year the vehicle is being claimed and it must meet the power and weight qualifications for the Clean Vehicle Credit.
  • The purchaser must not be the original owner, must not have claimed the credit in the last three years, can't be a dependent, must meet the income threshold for their filing status, and must purchase the vehicle from a qualified dealer, not a private sale.
• The credit can also be claimed for commercial vehicles through the Credit for Qualified Commercial Clean Vehicles which follows similar guidelines as described. The vehicle cannot get any "double benefit" - i.e. it cannot be claimed for both the Clean Vehicle Credit and the commercial credit (the VIN is required to prevent this).
• The credit can only be claimed once per vehicle, meaning once it is claimed on a new vehicle based on the vehicle identification number or VIN, then it cannot be claimed again if sold as a used vehicle - the less valuable used vehicle credit can be claimed. This is why the VIN is required to be reported on the tax return when reconciling the credit.
• You may also be able to claim a credit for installing an alternative fueling property for your vehicle through the Qualified Alternative Fuel Vehicle Refueling Property which includes EV charging stations. See details on energy efficient improvements to your home.

If you return or resell the vehicle within 30 days, you will not be eligible for the credit and the vehicle itself is no longer eligible for the credit since it was claimed and the vehicle was used. If you trade or sell the vehicle after 30 days, there is no recapture or repayment of the credit.

If you cancel the sale before using the vehicle or take possession of the vehicle, then you are no longer eligible for the credit, but the vehicle itself remains eligible.

All of the above information also applies to plug-in hybrid vehicles.

How the EV Tax Credit Is Changing (Again) in 2024

Through a transfect election, the entire credit can be claimed upfront or at the point of sale starting in 2024, going towards the cost of the car; this means the credit will be paid in advance directly to the dealer. Qualified EV dealers and salespersons are to address the value of the allowed credit for the vehicle(s) in question prior to the sale. This means the EV tax credit could be used in the form of cash or as a partial payment or down payment towards the vehicle. The IRS aims to issue a direct deposit or ACH payment of the credit within 2-3 business days to the dealer.

When taking the credit, you are required to file taxes for that year and must include the details of your credit and purchase. If you claim the credit when buying the vehicle and were ineligible for it or your tax refund is subject to recapture, you do not need to pay this credit back. In other words, advance payments of this credit that go to purchasing the vehicle do not need to be repaid if you do not owe taxes. Any excess amount of the credit taken is not subject to recapture from the buyer or dealer.

Because it is a tax credit, whether taken as a cash payment or paid directly towards the vehicle, this credit is not included in the gross income of the taxpayer and is not deductible for the dealer or salesperson.

When purchasing the vehicle, you must show the dealer proof of your identity (SSN or ITIN), a license or identification, documentation that your AGI is not expected to exceed the limits for the credit, an attestation that you will use the vehicle for personal use (new vehicles), proof that you will file a tax return for the year you are purchasing the vehicle, an agreement that if your AGI is over the limit that you will repay the credit, and an agreement that you elected to transfer the credit. Note that dealers are not liable for repayment, the buyer is.

If the vehicle is returned within 30 days, then the buyer is responsible for the repayment or recapture or the transferred credit and the vehicle is no longer eligible for the new EV tax credit.

The IRS allows two transfer elections per year, such as for purchasing two qualifying clean vehicles in the same year - two new vehicles, one new and one used, but not two used.

There are many requirements and regulations that dealers need to follow - be sure that the dealer you are going through is aware and compliant with these before proceeding with your purchase.

Is there a Loophole for the EV Tax Credit?

The credit is restricted to vehicles assembled in the U.S., but there may be an EV leasing tax loophole to claim the credit on vehicles that otherwise would not qualify. Because the business EV tax credit does not have this restriction, the business or car dealer may be able to pass the savings along to the buyer for a leased vehicle. This EV lease tax loophole may be available to take advantage of.

Find out how to claim tax credits for energy-efficient improvements to your home or other home improvement deductions. In addition, see other tax credits and tax deductions that you may qualify to claim on your tax return. When you prepare and e-file your return on eFile.com, the eFile app will select and enter any deductions and credits you qualify for on your tax return. Claim your EV tax credit on eFile.com; contact eFile.com support if you have further questions or need more help with your taxes.

See also: Can I claim a tax credit for a hybrid or plug-in hybrid? What is the old EV tax credit?

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