The new clean vehicle tax credits along with the commercial clean vehicle tax credits can be used for ‘qualifying’ fully electric cars, hybrids and fuel cell vehicles.
There are 4 ways to benefit from these credits for EV’s placed in service in 2023 or later:
- Purchase the EV and claim the clean vehicle credit
- Lease an EV and receive a benefit from the lessor’s EV discount
- Purchase a used EV that qualifies for the used EV tax credit
- Purchase an EV for business use and claim the commercial clean vehicle tax credit.
All of the vehicles mentioned must have the characteristics defined in the tax code which allow them be ‘qualified’ for the tax credits. There are also eligibility requirements for the purchasers.
In the interest of brevity, this article will provide an overview of the credits, with limited descriptions of qualifications and eligibility. Further details will be provided in later articles within the next few days.
THE CLEAN VEHICLE CREDIT went into effect in January of 2023 and continues through 2032. The maximum credit is $7500 and can be claimed for either business or personal use, or both.
The credit is non-refundable if use is only personal, meaning there is no credit beyond your tax liability in the year of purchase and unused portions cannot be carried over to future years.
If used for business purposes, the credit becomes part of the general business credit and may be carried back for 3 years and forward for 20.
There are 3 qualifiers to receive the credit.
1. your MAGI (modified adjusted gross income) cannot exceed specific limits based on your filing status
2. There is a limit on the MSRP (manufacturer’s suggested retail cap) depending on defined class of vehicle.
3. There are domestic assembly and components rules, which differ depending on date purchased.
LEASING A VEHICLE
This is a back door approach if you can’t find the vehicle you like or your income is too high. The leasing company can company can claim a commercial clean vehicle credit for each vehicle it purchases, Under the commercial clean credit rules, fewer restrictions apply. They MAY then pass the pass part or all of the credit on to you.
PURCHASE A USED ELECTRIC VEHICLE
You might be able to claim the credit if you purchase a used EV from a dealer. The criteria for used vehicles are easier to meet, but MAGI limitations are more strict.
PURCHASE AN ELECTRIC VEHICLE FOR BUSINESS USE
The maximum credit is still $7500 but could be smaller depending on the cost of the EV and percentage of business use.
As stated earlier, this is an introduction to the credits. In the next few days I’ll post more detailed explanations of each of these credits on this same website.
Back to you soon.