What's New for 2023 TAX CREDITS -- CLEAN VEHICLE CREDIT (Updated August 2023)
Clean Vehicle Credit
The new law eliminates the phase-out rules when a manufacturer reaches its 200,000th sale and replaces it with an expiration of the credit for all vehicles placed in service after 2032. Final assembly of the vehicle must occur within North America.
Under the new law for vehicles purchased after 4/18/23, the maximum $7,500 credit still applies, but is broken out into two components:
- A $3,750 credit when the vehicle satisfies the critical minerals requirement, plus
- A $3,750 credit when the vehicle satisfies the battery components requirement
The new law requires the car dealership who sells the vehicle to the taxpayer to furnish a report to the taxpayer and the IRS that contains:
- Name and taxpayer identification number of the seller
- Name and taxpayer identification number of the buyer
- Vehicle Identification Number (VIN) of the new clean vehicle
- Battery capacity of the new clean vehicle
- Verification that the taxpayer is the original user of the new clean vehicle
- The date of sale and the sale price of the vehicle
- Maximum credit allowable for the new clean vehicle being sold
- For sales after December 31, 2023, the amount of any transfer credit applied to the purchase
- A declaration under penalties of perjury from the seller
In addition to qualified electric vehicles, the credit also applies to qualified fuel cell motor vehicles.
No credit is allowed if the taxpayer's modified AGI for the tax year or the preceding tax year exceeds:
- $300,000 for MFJ
- $225,000 for HOH
- $150,000 for Single or MFS
NO credit is allowed if the manufacturer's retail price (MSRP) exceeds:
- $80,000 in the case of a van
- $80,000 in the case of a sport utility vehicle
- $80,000 in the case of a pickup truck and
- $55,000 in the case of any other vehicle
The new law also provides for a reduced credit for the purchase of a previously-owned clean vehicle.
Effective for vehicles acquired after December 31, 2022, the new law creates a new code section under IRC Section 25E called "Previously-Owned Clean Vehicles," which is a nonrefundable tax credit for qualified buyers who place in service a previously-owned clean vehicle. (Model year must be at least two years earlier than the calendar year in which the taxpayer acquires such vehicle)
The credit equals the lesser of:
- $4,000 or
- The amount equal to 30% of the sale price with respect to such vehicle
No credit is allowed if the taxpayer's modified adjusted gross income for the tax year or the precediing tax year exceeds:
- $150,000 for MFJ
- $112,500 for HOH
- $75,000 for Single or MFS
Electric Vehicle look-up -- To determine if a plug-in electric or fuel cell electric vehicle purchased new in 2023 or after qualified for the tax credit, go to: https://fueleconomy.gov/feg/tax2023.shtml