These electric cars can score you a big tax break
As more people turn to renewable energy and save on the roaring price of gas, electric and fuel cell vehicles (FCV) are becoming increasingly popular. If you’ve been thinking about getting an electric car, now might be the best time. Ford’s new hybrid pickup starts at less than $20K.
The Internal Revenue Service (IRS) recently updated the list of who would qualify for a tax credit if they buy an EV. The growing list comes after initial confusion about who recent rule changes would include.
Read on to see if you are eligible for up to a $7,500 tax break and which vehicles are now included.
Here’s the backstory
You may qualify for a credit of up to $7,500 under Internal Revenue Code Section 30D if you buy a new, qualified plug-in EV or fuel cell electric vehicle (FCV). The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles purchased from 2023 to 2032.
When the rule changes were announced, there was some confusion. For example, certain vehicles that qualified for tax credits in 2022 may not be eligible in 2023. Similarly, qualifying EVs can see the tax break disappear with updates that take effect in the future.
The credit is available to individuals and their businesses. To qualify, you must:
- Buy an eligible vehicle for your own use, not for resale.
- Use the eligible vehicle primarily in the U.S.
In addition, your modified adjusted gross income (AGI) may not exceed the following:
- $300,000 for married couples filing jointly.
- $225,000 for heads of households.
- $150,000 for all other filers.
NOTE: You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. If your modified AGI is below the threshold in one of the two years, you can claim the credit.
EV tax credit changes
As it stands, the new legislation includes the following:
- The removal of the 200,000-vehicle cap on tax credits that initially disqualified many popular models from Tesla, Toyota and GM.
- Vehicles not assembled in North America aren’t eligible for the credit. These include the BMW i4, Hyundai Ioniq 5, Kia EV6, and Subaru Solterra. NOTE: This rule might not apply if the vehicle is leased.
The Internal Revenue Service explains that the tax credit between $3,751 and $7,500 depends on the battery size and other criteria, such as not exceeding the manufacturer’s suggested retail price (MSRP).
Here are some of the vehicles that now qualify for the tax credit:
- Audi Q5 TFSI e Quattro PHEV SUV (MSRP $80,000 or below).
- BMW 330e sedan (MSRP $55,000 or below).
- BMW X5 xDrive45e SUV (MSRP $80,000 or below).
- Chevrolet Bolt and EUV hatchback (MSRP $55,000 or below).
- Chrysler Pacifica PHEV minivan (MSRP $80,000 or below).
- Ford Escape PHEV SUV (MSRP $80,000 or below).
- Ford F-150 Lightning pickup truck (MSRP $80,000 or below).
- Nissan Leaf S, S Plus, SL Plus, SV, and SV Plus hatchbacks (MSRP $55,000 or below).
- Tesla Model 3 Rear Wheel Drive (MSRP $55,000 or below).
One thing to keep in mind is the purchase price of the vehicle. The vehicle’s manufacturer’s suggested retail price (MSRP) can’t exceed: $80,000 for vans, sport utility vehicles and pickup trucks or $55,000 for other vehicles. Tesla recently lowered the price of some of its vehicles, presumably to qualify for these tax credits.
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.
You can find complete details about the tax credit here.
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Tags: battery, electric vehicles, IRS, updates
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