The Old Electric Vehicle or EV Tax Credit

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In 2023 and beyond, the IRS and federal government revised and established the electric vehicle or EV tax credit to be called the Clean Vehicle Tax Credit. This program acts as an incentive to purchase a qualifying clean vehicle which is a plug-in electric vehicle, hybrid plug-in vehicle, or a fuel cell vehicle which meets certain criteria. Get all the details on the linked page and learn how to claim the new EV tax credit on your 2023 year tax return and how you can get the payment up front as a down payment:

Clean Vehicle Tax Credit

What Was the Original EV Tax Credit?

Note: The below information applies to taxes prior to 2023. See the new EV tax credit.

The Qualified Plug-In Electric Drive Motor Vehicle Credit, commonly referred to as the federal EV tax credit, can be worth up to $7,500 in nonrefundable credit. For previous year returns, there is also the Alternative Motor Vehicle Tax Credit which can be claimed for fuel cell vehicles.

The first EV tax credits were introduced in 2008. You may be able to claim a tax credit for placing a new, qualified plug-in electric drive motor vehicle into service. Generally, most electric vehicles qualify for the credit and all typically earn you the full amount of $7,500, but there are some criteria.

Key points on how the EV tax credit works:

• The vehicle was purchased new,
• It has a 5-kilowatt hour storage battery which is charged externally,
• The electric vehicle or EV weighs less than 14,000 pounds, and
• The credit is being claimed for the year the vehicle was purchased and put into service.

This vehicle cannot be a traditional hybrid vehicle, or HEV, as it does not draw power externally. See information regarding hybrids and plug-in hybrids that may qualify for the credit.

The vehicle in question must be purchased new - it cannot be used and/or leased for you to receive the credit. The IRS tax credit for 2022 and earlier ranges from $2,500 to $7,500 per new electric vehicle (EV) purchased for use in the U.S. This nonrefundable credit is calculated by a base payment of $2,500, plus an additional $417 per kilowatt hour that is in excess of 5 kilowatt hours. This value cannot exceed $5,000, thus limiting the total credit to $7,500.

Note: a nonrefundable credit is an amount that only goes towards the taxpayer's tax liability. If you are expecting to owe $5,000 in taxes, but file for a $7,500 credit from a recently purchased electric car, you would expect to see $5,000, eliminating the difference of $2,500. See details on tax credits.

This credit does not carry forward and must be used for the year it was purchased.

Is There a Tax Credit for an Electric Motorcycle?

The electric car tax credit is similar to a rebate in that you cannot use it to purchase the vehicle, but can claim it after your purchase the vehicle. However, it is also unlike a rebate because it is not refunded you since nonrefundable tax credits can only be used to offset any taxes you may owe.

This credit can also be applied to a two-wheeled vehicle if certain circumstances are met. These are:

• The vehicle was purchased new,
• It can reach a speed of 45 miles-per-hour or more,
• It draws significant power from an electric motor,
• The battery has a minimum capacity of 2.5 kilowatt hours,
• It can be charged externally, and
• The vehicle weighs less than 14,000 pounds.

The credit for two-wheeled vehicle can be claimed for 10% of the cost of the vehicle in consideration up to a maximum of $2,500.

When to Claim the EV Tax Credit?

If you purchased an electric or alternative motor vehicle this year, you may be able to claim credit on your next tax return. You may also be able to amend a tax return to claim credit if you purchased it in a previous year and owed taxes.

The EV tax credit details can be found below; learn about the Tesla EV tax credit, Chevy Bolt EV credit, Nissan LEAF credit, and more of the best electric cars which may be eligible for this federal vehicle credit.

Important: the phaseout information here applies only to vehicles purchased prior to 2023.

The credit began to phase out when at least 200,000 qualifying vehicles manufactured by each company had been sold in the U.S. The only two companies to begin phasing out were Tesla and General Motors.

Once the process began, purchasers of electric vehicles were eligible to claim 50% of the credit if the vehicle was acquired in the first two quarters that the 200,000 limit had been reached. If filing for a vehicle purchased in the second two quarters, file for a nonrefundable credit amounting to 25% of the original amount.

To see an example of this, find the amounts for General Motors or Tesla in the table below. Both Tesla and GM have finished this process; if you purchased either of these vehicles in 2022, they are not eligible for a tax credit.

What Are Eligible Vehicles for the Original EV Tax Credit?

All of the following electric vehicles qualify for the credit for Qualified Plug-In Electric Drive Motor Vehicles. They have different credit amounts depending on the power output of the battery.

*Companies who initiated phasing out indicate different, decrementing values based on the year purchased. Only General Motors and Tesla finished this process, making them ineligible for the credit for vehicles purchased in 2022.

See a list of qualifying plug-in hybrids.

In addition to these nonrefundable credits, 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.

Should an electric vehicle be purchased for business purposes, it may be eligible for the credit and claimed on Form 3800, General business Credit - eFileIT.

Do you own any of the vehicles in this list or want to invest in one? Get the most out of that purchase when you file your taxes. Claim the credit online on Form 8936.

What Is the Alternative Motor Vehicle Tax Credit?

The Alternative Motor Vehicle Tax Credit can be claimed for placing a qualified fuel cell vehicle in service and may only be claimed by the original purchaser of the vehicle. A qualified fuel cell motor vehicle is a vehicle propelled by power from one or more cells which convert chemical energy directly into electricity. Currently, hydrogen fuel cell electric vehicles qualify.

eFile.com can be used to generate the information for Form 8910 to claim the credit and attach it to your next tax return. You can prepare and file these forms on eFile.com. Once you answer a few simple questions about your tax situation, we will generate the forms for you and help you complete them accurately.

Only partnerships and S corporations should report it on Form 3800, General Business Credit. Other taxpayers, when filing on eFile.com, will use the eFile app to report the information on Form 8910, Alternative Motor Vehicle Credit.

Below is a list of some certified fuel cell motor vehicles that may qualify for the credit:

• Honda FCX Clarity
• Honda Clarity Fuel Cell
• Hyundai Nexo
• Toyota Mirai II
• Hyundai Xcient Fuel Cell.

Refer to the vehicle's manufacturer for certification of the vehicle's status as a qualified alternative motor vehicle. The manufacturer should be able to provide a copy of the certification letter from the IRS.

Similarly to electric vehicles, states offer incentives for purchasing alternative motor vehicles. California, for example, may offer a rebate worth up to $4,500.

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.

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