The IRS has updated its tax rules for electric vehicles. There are four ways you can take advantage of a federal EV tax credit for qualified electric vehicles placed into service in 2023 or later:
Here are some details about each EV tax credit:
Under the new tax rules, the new clean vehicle credit is a maximum of $7,500 and will be available through 2032. To qualify, specific criteria must be met. These will include income limits, vehicle price caps, and domestic assembly requirements. Any vehicles delivered after April 18, 2023 will also need to meet critical minerals sourcing and/or battery components sourcing requirements.
If you are unable to find an EV that qualifies for the clean vehicle tax credit or your income is too high, another option is to lease an EV. The leasing company may be able to claim up to a $7,500 commercial clean vehicle tax credit. Then, they can pass some or all of that savings onto you as the lessee. It may be a lower down payment or reduced monthly lease payment amounts.
Used EV purchases may be eligible for a tax credit of up to $4,000. However, the vehicle must be bought directly from a dealer. The buyer and the vehicle will also be subject to income caps and other restrictions per the tax code.
If you purchase an EV for business use, you may qualify for a commercial clean vehicle tax credit. This credit is not subject to the same critical mineral or battery components sourcing requirements as a personal-use EV. A business-use EV makes it easier to qualify for this credit as of April 18.
In order to claim an EV tax credit, the seller must complete a seller’s report and provide a copy to both the IRS and the buyer. The buyer will need to file IRS Form 8936 for a personal-use EV tax credit, or Form 8936-A for the commercial clean vehicle credit.
It is important to find the right EV that qualifies for the specific tax credit you wish to claim. In addition, you will want to make sure you meet the income restrictions and other requirements, as well as taking the right steps to claim your EV tax credit.
For guidance with all your tax needs—including the updated EV tax credit rules—contact Illumination Wealth today.