The Inflation Reduction Act of 2022 (IRA), signed into law on August 16, 2022, directs new federal spending toward reducing carbon emissions, lowering healthcare costs, funding the Internal Revenue Service, and improving taxpayer compliance. The law renewed the Clean Vehicle Credit for new electric vehicles.
Electric Vehicle Credits
The law renewed the $7,500 Clean Vehicle Credit for new electric vehicles, which was set to expire at the end of 2022. It also added a 30 percent tax credit (capped at $4,000) for used electric vehicles. Great news for families on a budget. Starting in 2024, you can transfer these credits to a dealer, which allows for a point-of-sale discount rather than waiting until tax season. And if you need to install and EV charger at home, the Inflation Reduction Act renews a recently expired tax credit that covers 30 percent of the cost.
But, there are some new requirements specifically for new cars. In an effort to boost domestic EV and battery production, this tax credit was amended in a few ways. Immediately after the act became law in August, all eligible vehicles had to satisfy a requirement for North America. Further changes around critical mineral and battery sourcing requirements begin phasing in as soon as next year. And since not all EV manufacturers have the supply chains that comply with these provisions just yet, there’s going to be a temporary dip in the number of qualifying vehicles while automakers and downstream supply chains scale up U.S. production.
There are income limits. For the new car credit, single taxpayers making $150,000 or less, heads of household making $225,000 or less, and households filing jointly making $300,000 or less qualify. For the used car credit, single taxpayers must make $75,000 or less; heads of household must make $112,500 or less, and households filing jointly must make $150,000 or less.
There are vehicle price caps to qualify too. Smaller cars and sedans can cost up to $55,000; SUVs, trucks, and vans up to $80,000. For used cars, the price cap to qualify is $25,000.
To claim the credit, file Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles) with your tax return. You will need to provide your vehicle’s VIN. If you have any questions about this new law or any other tax related legal questions, please contact Martin D. Hauptman at mhauptman@mblawfirm.com.