Understanding EV Tax Credits for 2023
Brandon R. Amaral, CFP?, EA
Founder & Fee-Only Financial Planner | Helping Millennial Tech Workers Transition to Business Owners
For many EV (electric vehicle) shoppers, receiving a tax credit can significantly reduce your tax bill in April. While the Inflation Reduction Act of 2022 extended EV tax credits, it also added a few changes and restrictions that can be confusing to navigate.
Some of these include:
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Here is a guide to understanding EV tax credits in 2023:
Manufacturing sales cap
In previous years, once a manufacturer had sold 200,000 EVs, the tax credit was no longer available to taxpayers.?Beginning in 2023, the manufacturing caps have been removed and will last until 2032.
Income limits for taxpayers
One of the new restrictions added is an income eligibility cap.?To qualify for the tax credit, your income must be below the following thresholds in either the year you take delivery of the EV or the year prior, whichever is lower.
For used EVs, the maximum credit is $4,000:
Tax-Filing Status Modified Adjusted Gross Income limit
Single $75,000
Married Filing Jointly $150,000
Head of Household $112,500
Married Filing Separately $75,000
For new EVs, the maximum credit is $7,500:
Tax-Filing Status Modified Adjusted Gross Income limit
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Single $150,000
Married Filing Jointly $300,000
Head of Household $225,000
Married Filing Separately $150,000
Purchase price limits
Another restriction added is based on the purchase price of the EV:
The calculation for the purchase price does?NOT?include any sales tax or fees added by the dealer.
Final assembly requirements
The final restriction added is where the final assembly of the EV took place.?In order to qualify for the tax credit, the final assembly had to take place in North America.
You can search your vehicle’s VIN?here ?to see where its final assembly was.
Is there a lease loophole?
Some news sources have reported that you can bypass certain restrictions, such as the final assembly requirement and purchase price limit, if you opt to lease rather than purchase your EV.
What many of these sources are failing to highlight is the fact that only?commercial?vehicles are eligible for the tax credit when leasing.?This means that only EVs that are leased and used by a business will be eligible for the tax credit.
Understanding the nuances of the Inflation Reduction Act and guidance from the IRS can be confusing. If you would like to work with a financial planner to walk you through your options, I would love to help you!
To learn more about becoming a client, visit my?website ?and schedule a?complimentary meeting ?now!
This article first appeared on the Amaral Financial Planning blog at https://amaralfp.com/2023/05/07/understanding-ev-tax-credits-for-2023/
Disclaimer: This blog is for informational purposes only, and should not be considered advice or recommendations. All opinions expressed herein are solely those of Amaral Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made to another parties’ informational accuracy or completeness. You should consult your financial advisor, tax professional or legal counsel prior to implementation.
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1 年Still trying to find a good source for this, but most articles I have read indicate that a consumer lease works because the credit goes to the dealership which owns the car as a commercial vehicle. The dealership is then passing along the credit to the consumer as an additional discount. I think this is how they are skirting the "commercial" rules.