The Inflation Reduction Act passed by Congress and signed by President Joe Biden in 2022. included a modification of the federal tax credit for Americans who buy an electric vehicle. The new $7,500 IRS credit rules only apply to new vehicles purchased after 1 January 2023 but if you bought a car last year, your EV may be eligible for the previous rules.
One major change to Internal Revenue Code Section 30D, which the credit falls under, is that final assembly of the electric vehicle must be in North America, this also applies to vehicles purchased last year after August 16. There are several other requirements to qualify for a loan. We will tell you what they are and how to apply for a loan.
Who qualifies for a $7,500 credit?
Not everyone can qualify for credit with modified adjusted gross income thresholds set at $150,000 for single filers and $300,000 for those married filing jointly. The head of household limit is set at $225,000. You can use your income from the year you bought the new vehicle or from the previous year, whichever is lower. Above these levels you will not qualify for the clean vehicle tax credit, but over 70 percent of Americans earn less than $150,000. You can claim the credit using Form 8936 with your tax return. It is important to note that you must provide the Vehicle Identification Number (VIN) of your vehicle.
Nor do all vehicles qualify for the credit with a maximum manufacturer’s suggested retail price (MSRP) of up to $80,000 for vans, sport utility vehicles and pickup trucks and $55,000 for other vehicles. MSRP is the manufacturer’s suggested retail price, including options, accessories and trim, but excluding destination charges. However, this is not necessarily the price you pay.
In addition to the North American final assembly requirement, there are others that the vehicle must meet to qualify for the full $7,500 credit.
Vehicle requirements to qualify for $7,500 credit?
The Treasury Department and the IRS will issue guidance on the Clean Vehicle Tax Credit in the future, which will change how the credit is calculated. Once issued, there will be two parts to the credit, critical minerals and battery components. Each claim will qualify for a $3,750 tax credit. Vehicles that meet both are eligible for a total tax credit of $7,500.
For now, however, the previous formula will be used to calculate a tax credit of no more than $7,500. The principal credit is $2,500 and the vehicle must draw propulsion energy from a battery with a capacity of no less than 7kWh, which adds an additional $417 to the credit. Each additional kWh above 5kWh adds an additional $417 to the cap credit. Here are some other requirements.
Which vehicles qualify for the $7,500 tax credit?
Car buyers can check if the vehicle they are viewing on a car lot meets the final assembly site requirement for a $7,500 clean vehicle tax credit using Vehicle Identification Number (VIN) Decoder. on the website of the Ministry of Energy.
The IRS provides a list of qualified manufacturers, some of which have provided specific makes and models that qualify. They include Audi, BMW, Cadillac, Chevrolet, Chrysler, Ford, Jeep, Lincoln, Mercedes, Nissan, Rivian, Tesla, Volvo and Volkswagen.