TAX BULLETIN – Tax Tips, News, & Updates: Issue No. 3 | Vol No. 3
This Volume 3 newsletter focuses on the credits, which can potentially benefit individuals and businesses related to purchasing a vehicle.
You may be able to use certain credits and deductions to help lower your tax bill or increase your refund.
- Credits can reduce the amount of tax due.
- Deductions can reduce the amount of taxable income.
Clean Vehicle Tax Credits
We’ll help you determine whether your purchase of an electric vehicle (EV) or fuel cell vehicle (FCV) qualifies for a tax credit. These credits were made possible because certain credits and qualifying amounts were expanded by the Inflation Reduction Act of 2022. The credits and rules will apply based on the purpose and use of the vehicle:
The Inflation Reduction Act of 2022 provided new and extended credit and deductions for individuls, businesses, and some tax exempt organizations!
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- Buying a new vehicle for personal use
At the time of the sale, a seller must give you information about your vehicle’s qualifications. Sellers must also register online and report the same information to the IRS. If they don’t, the vehicle will not be eligible for the credit. You will be eligible for these Credits, and under these rules until tax year 2032.
If you bought a new, qualified plug-in electric vehicle (EV) in 2022 or before, you may be eligible for a clean vehicle tax credit up to $7,500 under Internal Revenue Code Section 30D.
The credit equals:
- $2,917 for a vehicle with a battery capacity of at least 5 kilowatt hours (kWh)
- Plus $417 for each kWh of capacity over 5 kWh
The maximum credit is $7,500. It is non-refundable and therefore is limited to the amount of taxes owed or $7,500. Any excess credits cannot be applied to future years. You can’t apply any excess credit to future tax years.
Vehicle Eligibility for Credit
To qualify, a vehicle must:
- Have a battery capacity of at least 7 kilowatt hours
- Have a gross vehicle weight rating of less than 14,000 pounds
- Be made by a qualified manufacturer
- Undergo final assembly in North America
- Meet critical mineral and battery component requirements (as of April 18, 2023)
Sales qualifies only if:
- You buy the vehicle new.
- The seller must report the required information to you and the IRS at the time of sale.
- Sellers are required to report your name and taxpayer identification number to the IRS for you to be eligible to claim the credit.
In addition, the vehicle’s manufacturer suggested retail price (MSRP) can’t exceed:
- $3,750 if the vehicle meets the critical minerals requirement only
- $3,750 if the vehicle meets the battery components requirement only
- $7,500 if the vehicle meets both
A vehicle that doesn’t meet either requirement will not be eligible for credit.
Vehicles Placed In-service After April 18, 2023
Vehicles will have to meet all the same criteria listed above, plus meet new critical mineral and battery component requirements for a credit up to:
- $3,750 if the vehicle meets the critical minerals requirement only
- $3,750 if the vehicle meets the battery components requirement only
- $7,500 if the vehicle meets both
A vehicle that doesn’t meet either requirement will not be eligible for credit.
For additional information and requirements details you can visit energy.gov or residential clean energy credit. Contact us for help with your eligibility for these credits and or tax preparation!
WE HOPE YOU ENJOYED & LEARNED FROM THIS MONTH’S BULLETIN!
Contact us for more information which is specific to your situation as there are always exceptions to the IRS rules and specific to the states’ rules!
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