Understanding the Updated Electric Vehicle Tax Credit

Mar 21, 2024 1:48:59 PM

Last year, we wrote about the updated Electric Vehicle (EV) tax credit that was included in the passing of the Inflation Reduction Act (IRA). The EV tax credit has changed, as of January 1st, 2024 – the changes make it easier for consumers to claim the tax credit but also reduce the number of eligible vehicles.

Electric Vehicle Tax Credit

The EV tax credit now allows consumers to claim their tax credit when filing their taxes at the end of the year or transferring the credit the dealership to lower the price of the car at the point of sale. The hope is that this change will make purchasing electric vehicles more affordable for consumers by reducing the cost of the vehicle. It is important to note that currently, the dealer is not required to verify that you are eligible for the tax credit. The liability associated with income eligibility is on the individual purchasing the vehicle. We recommend asking a tax expert to verify that you qualify for the tax credit.

Which vehicles qualify for the EV tax credit?

The other change that occurred on January 1, 2024 was the requirements that new electric vehicles need to meet to qualify for the tax credit. Vehicles may qualify for all or part of the tax credit depending on which criteria are met by the manufacturer. The IRS recommends using the tool on the FuelEconomy.gov website for the most up-to-date information on eligible vehicles.

Income Eligibility

The income limits that need to be met to qualify for the EV tax credit have not changed in 2024. They are based off your modified adjusted gross income and must not exceed:

New EVs

  • Single and married filing separately: $150,000.
  • Head of household: $225,000.
  • Married filing jointly: $300,000.

Used EVs

  • Single and married filing separately: $75,000.
  • Head of household: $112,500.
  • Married filing jointly: $150,000.

The IRS allows for the use of your modified adjusted gross income from either the year the vehicle was delivered or the year before delivery, whichever is less. If your income is below the threshold for one of the two years, you can still claim the credit.(https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after).

Used EV tax credit qualifications:

The used EV tax credit allows for a credit of up to $4,000, limited to 30% of the cars purchase price. Other qualifications are:

Sale price of $25,000 or less.

  • Model year at least 2 years old.
  • Only qualifies for the first transfer of the vehicle.
  • Vehicle must weigh less than 14,000 pounds.
  • Vehicle must be plug-in electric or fuel cell with at least 7-kilowatt hours of battery capacity.
  • Purchased from a dealer. (https://www.irs.gov/credits-deductions/used-clean-vehicle-credit)

The information in this article is intended for general educational purpose, so it is important to contact a professional for specific tax advice.



Tags: Taxes, Sustainability