Navigating the Federal Electric Vehicle Tax Credit

Are you considering the purchase of a NEW electric vehicle (EV), plug-in hybrid, or fuel cell electric vehicle in 2024 or did you purchase one in 2023?
The federal income tax credit for these eco-friendly vehicles is a significant incentive. Here's a breakdown of the key details:

1. Maximum Credit of $7,500:

• All-electric, plug-in hybrid, and fuel cell electric vehicles purchased new, after 2022, could qualify for a federal tax credit of up to $7,500. However, the actual amount depends on factors such as the vehicle's MSRP, final assembly location, battery sourcing, and your modified adjusted gross income (AGI) ​

2. ​Eligibility Criteria:

• To qualify, individuals and businesses must:
  • ​​Purchase the vehicle for personal use, not for resale.
  • Use the vehicle primarily in the U.S.
  • Have a modified AGI below $300,000 for married couples filing jointly, $225,000 for heads of households, and $150,000 for other filers.

3. Vehicle Requirements:

• To be eligible, the vehicle must:
  • Have a battery capacity of at least 7 kilowatt hours.
  • Have a gross vehicle weight rating below 14,000 pounds.
  • Be manufactured by a qualified manufacturer.
  • Fuel cell vehicles are eligible regardless of the manufacturer.
  • Meet the Final Assembly Requirement, indicating assembly in North America.

4. Critical Minerals and Battery Component Requirements:

• For vehicles placed in service after April 18, 2023, the credit amount depends on meeting critical minerals and/or battery component sourcing requirements.
• Vehicles meeting both requirements may qualify for the full $7,500 credit, while those meeting only one receive $3,750.
• MSRP Requirement: The vehicle's MSRP can't exceed $80,000 for vans, SUVs, and trucks, and $55,000 for other vehicles.

5. Final Assembly Location Verification:

• Verify your vehicle's final assembly location using the VIN on the window sticker or the Department of Energy's online VIN Decoder tool.
• For vehicles placed in service after January 1, 2024, the dealer must be registered with IRS Energy Credits Online.

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6. MSRP Definition:

• The MSRP is the manufacturer's base retail price plus the retail price of attached accessories.
• Exclusions: It does not include destination charges, dealer-added items, taxes, fees, or incentives.

7. Filing for the Credit:

• For vehicles placed in service before January 1, 2024, file Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit, with your tax return to claim the credit.
• The credit is nonrefundable, capped at your tax liability, and cannot be carried forward.

8. Changes Starting January 1, 2024:

• Credit eligibility and amount will be determined at the time of sale using the IRS Energy Credits Online website.
• The dealer will complete and submit the time-of-sale report online, providing real-time acceptance or rejection.
• You will receive a copy of the time-of-sale report from the dealer, necessary for claiming the credit.

9. Eligibility Verification:

• Search for eligible vehicles using this link.
• If the vehicle qualifies, you have two options:
  • Claim the credit on your tax return using Form 8936.
  • Transfer the credit to the dealer, reducing your final purchase cost. The dealer will be reimbursed by the IRS.

10. Buyer Responsibilities:

• Dealers aren't required to verify buyer eligibility at the time of sale.
• It's your responsibility to ensure you meet all buyer requirements.
• Dealers must provide modified adjusted gross income requirements for your information.

Navigate the Federal Tax Credit for Pre-owned Electric Vehicles

1. Federal Tax Credit for Pre-owned Electric Vehicles:

• Effective January 1, 2023:
  • Pre-owned all-electric, plug-in hybrid, and fuel cell electric vehicles may qualify for a federal income tax credit.
  • The credit equals 30% of the sale price, capped at a maximum credit of $4,000.

2. Credit Details:

• The credit is nonrefundable, meaning it cannot exceed your tax liability.
• Excess credit cannot be applied to future tax years.

3. Qualification Criteria:

• Pre-owned vehicles must be purchased on or after January 1, 2023.
• Purchase must be from a dealer.
• The sale price should be $25,000 or less.
• The vehicle must have a model year two years prior to the current calendar year.

4. Exclusions:

• Pre-owned vehicles purchased before 2023 do not qualify for this credit.
• New vehicles may be eligible for other credits available.

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5. Who Qualifies:

• Individuals purchasing a qualified plug-in electric vehicle (PEV) or fuel cell vehicle (FCV) under Internal Revenue Code Section 25E may qualify. 

6. Qualification Criteria:

• Be an individual using the vehicle, not for resale.
• Not be the original owner.
• Not be claimed as a dependent on another person’s tax return.
• Not have claimed another used clean vehicle credit in the three years before the purchase date.

7. Income Thresholds:

• Modified adjusted gross income (AGI) limits:
  • $150,000 for married filing jointly or a surviving spouse.
  • $112,500 for heads of households.
  • $75,000 for all other filers.
• Use the modified AGI from the year of delivery or the year before, whichever is less.

8. Vehicle Requirements:

• Made by a qualified manufacturer.
• Sale price must be $25,000 or less.
• Model year at least two years earlier than the purchase year.
• Not transferred after August 16, 2022, to a qualified buyer.
• For use primarily in the United States.
• Gross vehicle weight rating of less than 14,000 pounds.
• Eligible fuel cell vehicle or plug-in electric vehicle with a battery capacity of at least 7 kilowatt hours.

9. Qualified Sales:

• Purchase from a licensed dealer.
• For qualified used PEVs, the dealer provides required information.
• Information includes dealer and buyer details, sale date and price, VIN, battery capacity, and transfer credit details.
• For sales after December 31, 2023, the dealer must be registered with IRS Energy Credits Online.

​For additional information on the Federal Electric Vehicle Tax Credit please contact your Cornbelt Financial representative today.