The Inflation Reduction Act (IRA) provides taxpayers many new options for clean energy tax credits while also extending and modifying existing incentives.
The IRA significantly modified the New Clean Vehicle Credit (formerly known as Plug-In Electric Drive Vehicle Credit) criteria by including new requirements for North America final assembly, taxpayer income thresholds, vehicle sales price thresholds, critical mineral requirements, and battery component requirements. These changes take effect in 2023.
Credit for vehicles purchased in 2022
Shortly after enactment of the IRA, the Internal Revenue Service (IRS) released information to help taxpayers navigate credit eligibility based on immediate changes that were effective for vehicles purchased before January 1, 2023.
Credit for vehicles purchased in 2023
Beginning January 1, 2023, the credit contains several new terms and qualifications. Although taxpayers need familiarity with these terms to make informed buying decisions, manufacturers have the responsibility to certify with the IRS that a vehicle qualifies for the credit. The IRS maintains a list of qualifying vehicles for reference.
What you need to know about the Clean Vehicle Credit
To help taxpayers determine eligibility, the IRS released Frequently Asked Questions (FAQs) to clarify key revisions under the new legislation.
Below is a summary of some of the terms and key credit criteria (be sure to review the full FAQ document for complete information).
Claiming the credit
Next steps for utilizing the Clean Vehicle Credit
While the IRS has recently released information to help clarify the new Clean Vehicle Credit requirements, the responsibility falls to the manufacturer to certify a vehicle’s eligibility. This means taxpayers are not directly responsible for determining if a vehicle qualifies for the credit. Instead, the taxpayer’s responsibility is to determine if they meet appropriate AGI thresholds and if the credit is beneficial to their unique tax situation.
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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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