Life Clean Vehicle Tax Credit: Find Out If You Qualify Read the Article Open Share Drawer Share this:Click to share on Facebook (Opens in new window)Click to share on Twitter (Opens in new window)Click to share on LinkedIn (Opens in new window)Click to share on Pinterest (Opens in new window)Click to print (Opens in new window) Written by Katharina Reekmans, EA Published Jan 19, 2023 - [Updated Feb 24, 2023] 3 min read We’ll do your taxesand find every dollaryou deserve When your Full Service expert does your taxes,they’ll only sign and file when they know it’s 100% correctand you’re getting the best outcome possible, guaranteed. Get started now With the Clean Vehicle Credit, under the Inflation Reduction Act, not only do you have a chance to save money on gas by purchasing an electric car, but this credit is a dollar-for-dollar credit that can reduce taxes you may owe and potentially lower your taxes owed by up to $7,500. Guidance for Vehicles Purchased in 2022 New electric vehicles purchased prior to the Clean Vehicle Credit were eligible for a tax credit up to $7,500. Under the Inflation Reduction Act, people are still eligible for a tax credit up to $7,500, but it has been expanded. Starting January 1, 2023 people who purchase used electric vehicles may be eligible for a credit of 30% of the sale price up to $4,000 depending on their income. For vehicles purchased after August 16, 2022, only vehicles for which final assembly occurred in North America qualify. The U.S. Department of Energy has released a list of model year 2022 and 2023 vehicles with final assembly in North America. If you ordered an electric vehicle before August 16, 2022 and took delivery of your vehicle at a later date you may still be able to claim tax credits for a vehicle not assembled in North America if you had a written binding contract to purchase the vehicle. The Internal Revenue Service (IRS) defines a “written binding contract” as a nonrefundable deposit or down payment of at least 5% of the purchase price. Guidance for Vehicles Purchased Starting in 2023 Most of the changes are effective with electric vehicle purchases starting January 1, 2023. The major difference is that effective August 17, 2022 final assembly in North America is required. The maximum of up to $7,500 is the sum of two amounts: the critical minerals amount and the battery components. Critical Minerals ($3,750): Starting in 2023, to qualify for this portion of the credit, at least 40% of the value of the battery’s applicable critical minerals must have been extracted or processed in the United States (or in a country with which the United States has a free trade agreement) or recycled in North America. The 40% amount increases by 10% each year until it reaches 80% in 2027 and thereafter. Battery Components ($3,750): Starting in 2023 to qualify for this portion of the credit, at least 50% of the value of the battery’s components must have been manufactured or assembled in North America. The 50% amount increases by 10% each year from until it reaches 100% in 2029 and thereafter. Some other changes to the credit starting in 2023 include: Manufacturer’s suggested retail price for vans, sport utility vehicles, and pick ups is limited to $80,000 and other cars are limited to $50,000. For new cars, modified adjusted gross income cannot exceed $300,000 married filing jointly, $225,000 head of household, $150,000 single. For used cars, modified adjusted gross income cannot exceed $150,000 married filing jointly, $112,500 head of household, $75,000 single. New reporting requirements to include reporting the both taxpayer and seller vehicle identification number (VIN) reporting. If you purchase an electric vehicle in 2024 you will have the option to transfer the credits to dealers, and allow the credit to be applied at your point of sale when making the purchase. For business owners, the Inflation Reduction Act also adds a tax credit of up to $7,500 for new commercial clean vehicles placed in service after December 31, 2022. We’ll do your taxesand find every dollaryou deserve When your Full Service expert does your taxes,they’ll only sign and file when they know it’s 100% correctand you’re getting the best outcome possible, guaranteed. Get started now Previous Post TurboTax Live Full Service in Español Is Ready to Help… Next Post TurboTax Tax Trends Report Written by Katharina Reekmans Katharina Reekmans is an Enrolled Agent and a contributor to the TurboTax Blog team. Katharina has years of experience in tax preparation and representation before the IRS. Her passions surround financial literary and tax law interpretation. She has a strong commitment to using all resources and knowledge to best serve the interest of clients. Katharina has worked as a senior tax accountant, operations manager, and controller. Katharina prides herself on unraveling tax laws so that the average person can understand them. More from Katharina Reekmans Leave a Reply Cancel reply Browse Related Articles Health Care Inflation Reduction Act of 2022 Home Energy Efficient Improvements to Save Money at Tax-Time Tax Planning 6 Tips to Help You Plan for Next Tax Season Now Home Earth Day 2023: Going Green Saves You Green on Your Tax… Tax Planning Your Guide to Filing Taxes in 2023 Tax Tips Buy a Hybrid Car and Get a Tax Credit Tax Deductions and Credits Expiring Tax Provisions Part II Tax Tips It’s Time to Buy a New Car- Can I Buy a Hybrid an… Home Repaying the First-Time Homebuyer Tax Credit Tax Reform Tax Reform 101: How the Tax Reform Law Impacts Self-Emp…