If you buy a new plug-in electric vehicle (EV) or fuel cell vehicle (FCV) in 2023 or after, you may qualify for a clean vehicle tax credit of up to $7,500. The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles purchased from 2023 to 2032. The credit is available to individuals and their businesses.
To qualify, you must buy it for your own use, not for resale, and use it primarily in the U.S. In addition, your modified adjusted gross income may not exceed:
- $300,000 for married couples filing jointly.
- $225,000 for heads of households.
- $150,000 for all other filers.
You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. If your modified AGI is below the threshold in 1 of the 2 years, you can claim the credit. The credit is nonrefundable, so you cannot get back more on the credit than you owe in taxes. You cannot apply any excess credit to future tax years. There are also strict rules for what kinds of vehicles are eligible. See IRS New Clean Vehicles.
Commercial Vehicle Credit
Businesses and tax-exempt organizations that buy a qualified commercial clean vehicle may qualify for a clean vehicle tax credit of up to $40,000. The credit equals the lesser of:
- 15% of your basis in the vehicle (30% if the vehicle is not powered by gas or diesel).
- The incremental cost of the vehicle.
The maximum credit is $7,500 for qualified vehicles with gross vehicle weight ratings (GVWRs) of under 14,000 pounds and $40,000 for all other vehicles.
Businesses and tax-exempt organizations qualify for the credit, and there is no limit on the number of credits your business can claim. For businesses, the credits are nonrefundable, so you can’t get back more on the credit than you owe in taxes. A 45W credit can be carried over as a general business credit.
There are strict eligibility rules. See IRS Commercial Clean Vehicle Credit for more details.
Used Clean Vehicle Credit
In 2023, if you buy a qualified used electric vehicle or fuel cell vehicle from a licensed dealer for $25,000 or less, you may be eligible for a used clean vehicle tax credit, also referred to as a previously owned clean vehicle credit. The credit equals 30% percent of the sale price up to a maximum credit of $4,000. The credit is nonrefundable and you cannot get back more on the credit than you owe in taxes. You cannot apply any excess credit to future tax years.
To qualify, you must:
- Be an individual who bought the vehicle for use and not for resale.
- Not be the original owner.
- Not be claimed as a dependent on another person’s tax return.
- Not have claimed another used clean vehicle credit in the 3 years before the purchase date.
In addition, your modified AGI may not exceed:
- $150,000 for married filing jointly or a surviving spouse.
- $112,500 for heads of households.
- $75,000 for all other filers.
You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. If your income is below the threshold for 1 of the 2 years, you can claim the credit.
There are additional important qualifications available at Used Clean Vehicle Credit.