According to the IRS, starting in 2023, taxpayers who buy a new electric vehicle (“EV”) are allowed a New Clean Vehicle credit of up to $7,500. Taxpayers who are interested in purchasing a used EV instead may qualify for the Previously Used Vehicle credit, which equals to the lesser of: $4,000; or 30% of the sale price
Both the New Clean Vehicle Credit and the Previously Used Vehicle Credit are nonrefundable personal credits, meaning the taxpayer needs to have a federal tax liability on their personal tax return to get the benefit. To get the full tax benefit of the credit, the taxpayer must have a federal tax liability of at least the credit amount. Any credit not used cannot be refunded or carried forward. In addition, you must wait until you file your tax return to get the benefit – that could be 15 months or more after buying the car.
Here are some keypoints regarding the new changes;
FOR TAXPAYERS (BUYERS)
- make the election to transfer the credit no later than the time of sale buyers get up to $7,500 off the purchase right at the dealership, rather than wait until filing their tax return to get the credit
- transfer the entire amount of the allowable credit to the registered dealer
- attest to being under the eligible income threshold The income limits are $150,000 for individuals and $300,000 for married couples filing jointly—could also affect a decision. If your income is going above the limit in 2023 or 2024, you need to buy this year to get the credit.
- cannot make more than two transfer elections per taxable year
The rules don’t apply to leases. Taxpayers who choose the point-of-sale rebate program still must report their EV purchase on their tax return. 19 states offer additional incentive beyond the federal EV credit ranging from $1,000 in Alaska and Delaware to $7,500 in California, Connecticut and Maine, according to the Tax Foundation, a Washington, D.C.,-based nonprofit that supports lower taxes. Massachusetts Department of Energy Resources’ Massachusetts Offers Rebates for Electric Vehicles (MOR-EV) Program offers residents, non-profits, and businesses rebates of up to $3,500 toward the purchase or lease of eligible ZEVs. On the flip side, many states started levying higher registration fees for EVs compared with internal-combustion vehicles as well as taxes on public EV charging.
JEFFREY NEWMAN IS A WHISTLEBLOWER LAWYER WHO CAN BE REACHED AT JEFF@JEFFNEWMANLAW.COM. HIS FIRM WEBSITE IS WWW.JEFFNEWMANLAW.COM AND THE TELEPHONE NUMBER IS 617-823-3217
RECORD KEEPING BY ALL PARTIES
Both sellers and dealers must retain information related to the vehicle sale and credit transfer for at least three years.
