The federal tax credit for electric vehicles (EVs) has been extended and revamped for 2023 and beyond. For individuals considering the purchase of an electric vehicle (EV) in 2023, understanding the details of the Federal EV Tax Credit is important as changes continue. Let’s delve into how the credit works, the varying credit amounts, and eligibility requirements.
Credit Amount Calculation and Eligibility
The amount of the Federal EV Tax Credit is determined through a calculation that takes into account various factors, including the sourcing and assembly of the vehicle. The credit is applicable in the year of EV delivery. Here are the key details:
- Full Credit: For EVs placed into service on or after April 18, 2023, that meet both battery and mineral component requirements, the full tax credit amount is $7,500. To qualify for the full credit, the vehicle must meet specific criteria related to its battery and mineral components.
- Partial Credit: EVs placed into service on or after April 18, 2023, that meet either the battery or mineral component requirements are eligible for a partial tax credit amount of $3,750. While these vehicles do not qualify for the full credit, they can still benefit from a significant reduction in the purchase price.
Used Electric Vehicle Credit
The Federal EV Tax Credit also extends to certain used EVs, provided they meet specific conditions. Here are the details:
- Previously Owned EVs: Used EVs, which are at least two years old and classified as “clean vehicles,” are eligible for a separate tax credit. The credit amount is determined as either up to $4,000 or 30% of the vehicle’s price, whichever is less. However, a previously owned EV only qualifies for the first transfer of a vehicle and must be purchased from a licensed dealer.
- Eligibility Criteria: To be eligible for the used EV tax credit, the vehicle must meet the definition of a “clean vehicle.” This includes hydrogen fuel cell cars, plug-in hybrid vehicles with 4-7 kilowatt hours of battery capacity, and certain commercial clean vehicles (subject to weight restrictions).
To claim the Electric Vehicle (EV) tax credit, it’s important to be aware of the income limits set by the Internal Revenue Service (IRS). These limits, based on your modified adjusted gross income (MAGI) or adjusted gross income (AGI), determine eligibility for the tax credit. Here is an overview of the income limits based on filing status:
If you meet the prior criteria and want to see what EVs are eligible for credit, the US Department of Energy provides a link to look up the make, model and purchase date to see if you are eligible to receive a credit.
Presented by the Financial Planning Committee of Lake Street, an SEC Registered Investment Adviser
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