IRS Offers Up to $7,500 Tax Credit for New EV and FCV Purchases

The Internal Revenue Service (IRS) provides eligible taxpayers with a credit of up to $7,500 under Code Section 30D for purchasing a new plug-in electric vehicle (EV) or fuel cell electric vehicle (FCV). Thanks to the 2022 Inflation Reduction Act, the rules have changed, allowing taxpayers to benefit from this tax credit until 2032, even if the vehicle is bought in 2023.

Eligibility for the IRS Tax Credit

To qualify for the credit for new clean vehicles, several requirements must be met:

• Eligible Purchasers: Both businesses and individuals can qualify.
• Usage: Vehicle purchases are for personal use, not resale, and must be made.
• Location of Use: The vehicle must be primarily driven in the United States.

Income Thresholds:

• Couples filing jointly or surviving spouses: modified adjusted gross income (AGI) of $300,000 or less.
• Heads of households: modified AGI of $225,000 or less.
• Other filers: modified AGI of $150,000 or less.

Interestingly, you can use the AGI from the year before the vehicle’s delivery or from the same year. You are eligible to receive the credit if your AGI falls below the cutoff in either of these two years. 

The IRS warns that failing to transfer the credit will result in it being nonrefundable when you file your tax return. The base amount is usually $2,500, but it can be up to $7,500.

These changes ensure that the tax credit’s advantages are available to a wide variety of taxpayers while also encouraging the use of clean energy vehicles throughout the country.