The Inflation Reduction Act of 2022 provides a new federal tax incentive for individuals purchasing energy efficient and certain pre-owned clean vehicles beginning January 1, 2023.
Beginning in 2023, taxpayers may claim a credit on purchases of used electric vehicles (EV) or fuel cell vehicles (FCV). While the credit for pre-owned vehicles is similar to the credit for new vehicles, there are a number of differences, including:
To help taxpayers determine eligibility, the IRS released Frequently Asked Questions (FAQs) to clarify key revisions under the IRA. Below is a summary of some of the terms and key credit criteria (be sure to review the full FAQ document for complete information).
Like the new vehicle credit, manufacturers must certify specific vehicles meet applicable credit criteria and dealers must provide buyers with a seller’s report. As a resource, the IRS maintains a list of qualifying used vehicles.
The Clean Vehicle Credit under Internal Revenue Code (IRC) Section 30D for new vehicles includes similar qualifications, but is more restrictive overall.
Beginning January 1, 2023, qualified new vehicles must meet the following requirements:
Both the Pre-Owned Clean Vehicle Credit and Clean Vehicle Credit have sales price and taxpayer income limitations although the thresholds for pre-owned clean vehicles are lower. Unlike the new vehicle credit, the credit for pre-owned vehicles does not have manufacturing or component requirements; however, it does restrict the purchaser and where a qualifying vehicle can be purchased.
In 2023 taxpayers purchasing a used clean vehicle may claim the nonrefundable Pre-Owned Clean Vehicle Credit. Like the credit for new clean vehicles, a transfer program allowing taxpayers to directly transfer the clean vehicle credit to the dealership is expected.
When considering the purchase of a new or previously owned electric vehicle it is also important to consider the variety of state incentives that may be available.
Questions about how the changes will impact you?
This article is provided for general informational purposes only. It is not legal, accounting or other professional advice, as it does not address any individual facts, circumstances or concerns. Before making personal or business related decisions, please consult with appropriate legal, accounting or other qualified professionals.
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