Those who will purchase or have already purchased a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) this year could qualify for a federal tax credit. The Internal Revenue Service (IRS) has implemented rules that allows EV owners to avail of the clean vehicle tax credit. If the EV passes the new qualifications set by the IRS, the owners can avail credit of up to $7,500.
IRS Adjusts Qualifications of EVs for Federal Tax Credit
As reported by Interesting Engineering, EV owners may qualify for a tax credit of up to $7,500 under the Internal Revenue Code Section 30D. The tax credit can be availed by individuals who purchased the electric car for their personal and business use within the United States.. However, buying the EV for reselling will make the buyer ineligible for the tax credit.
Married couples making a joint filing for the tax credit must have a modified adjusted gross income (AGI) of at most $300,000. Furthermore, if the EV owner is the head of the household, they must have an AGI of at most $225,000, while $150,000 is the set AGI for other filers to qualify for the tax credit. Note, that the tax credit is non-refundable, so filers with excess credit cannot use it for the following year's taxes.
As for the electric vehicle owned by the filer, it must have a battery capacity of at least 70 kW-hr and a gross weight rating of less than 14,000 lbs. Also, all EVs excluding FCVs must be produced by a qualified manufacturer.
On the other hand, the suggested retail price (MSRP) for vans, sport utility vehicles and pickup trucks, as set by the manufacturer, must not exceed $80,000, while all other vehicles must have an MSRP of at most $55,000. IRS emphasized that filers must report their names and tax identification numbers to them to prove that they are eligible to claim the tax credit.
The date when the users placed their electric cars in service will be the basis for the final amount of the tax credit. Specifically, the minimum credit for vehicles placed in service between January 1 and April 17 this year will be $3,751. Those vehicles placed in service from April 18 onwards will have different bases for the minimum credit, which are the battery components and the critical minerals used in manufacturing the EV.
Related Article: What Are the Pros and Cons of Using Electric Cars?
Revamped Rules for Qualification Allow Only Six Vehicles to Get Full Tax Credit
As mentioned earlier, the IRS has updated the qualifications for the federal tax credit, including minerals and battery components of an electric vehicle placed in service on April 18 onwards. Specifically, the minerals and components must come from North America or a U.S. trade partner, according to NPR.
Hence, General Motors and other US car makers will get the most benefit out of the revamped IRS rules. As for the popular EV models today, those that qualify for the full tax credit of $7,500 under the revised rules are Cadillac Lyriq, Chevy Bolt, Chevy Bolt EUV, Tesla Model 3, Tesla Model Y and Ford F-150 Lightning.
Unfortunately, the revised rules now remove VW ID.4, Nissan Leaf and Rivians from the list of vehicles qualified for the tax credit.
