After months and months of debate and compromise by the Senate, the Inflation Reduction Act of 2022 was passed by Congress, effective August 16, 2022. This new law is chock full of provisions, several of which could impact your income taxes. One provision that you’ve probably heard about on the news is for an Electric Vehicle Tax Credit.
But news headlines, no matter where you get yours, don’t contain all of the information you need to take advantage of this tax credit. Spending a lot of money on an electric vehicle with the expectation of a dollar-for-dollar federal tax reduction of up to $7,500 could backfire if your purchase does not qualify.
Here are three tips to see if you qualify for an Electric Vehicle (EV) Tax Credit:
- Vehicles that Qualify
In general, only model year 2022 and early 2023 electric vehicles that are assembled in North America qualify for the credit. The Department of Energy published a website for consumers and auto dealers to enter the vehicle’s Vehicle Identification Number (VIN) to determine if it qualifies at https://afdc.energy.gov/laws/inflation-reduction-act.
- Income Limitations
EV purchasers who report income on their tax return above specified levels do not qualify for the tax credit. Single taxpayers with incomes over $150,000 and married couples filing jointly that report income more than $300,000 cannot take the EV Tax Credit. The IRS will release more details about calculating qualifying income limits soon.
- Vehicle Price Limit
To qualify for the EV tax credit, new vehicles would need to have a suggested retail price below $55,000 for sedans. The price threshold is $88,000 for SUVs, trucks, and vans. Used vehicle models need to be at least two years old and meet a price cap of $25,000 to qualify.
The Inflation Reduction Act of 2022 is full of provisions that could impact your income taxes, including an Electric Vehicle Tax Credit. Looking ahead, this new law also makes several more changes to the EV Tax Credit that will take effect starting in 2023.
Want to know more about what’s new in 2022 and the future? Check out the details on the IRS website at https://www.irs.gov/credits-deductions/individuals/plug-in-electric-drive-vehicle-credit-section-30d.