Electric Vehicle Tax Credits for Individuals

Electric Vehicle Tax Credits for Individuals

August 9, 2023

The Inflation Reduction Act of 2022 made several changes to the tax credits for qualified plug-in electric drive motor vehicles.

Beginning January 1, 2023, eligible vehicles may qualify for a tax credit of up to $7,500. The amount of the credit depends on when the eligible vehicle is placed in service and meets certain requirements.

To qualify:

You must buy the vehicle for your own use and not for resale and use it primarily in the U.S. In addition, your modified adjusted gross income (AGI) 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 income is below the threshold in 1 of 2 years then you can take the credit.

Qualified Vehicles:

• Have a battery capacity of at least 7 kilowatt hours
• Have a gross vehicle weight rating of less than 14,000 pounds
• Be made by a qualified manufacturer. 
  • Fuel cell vehicles (FCVs) do not need to be made by a qualified manufacturer to be eligible. See  Proc. 2022-42for more detailed guidance.
• Undergo final assembly in North America
• Meet critical mineral and battery component requirements (as of April 18, 2023).
• You buy the vehicle new
• Sellers are required to report your name and taxpayer identification number to the IRS for you to be eligible to claim the credit.

In addition, the vehicle's manufacturer suggested retail price (MSRP) can't exceed:

• $80,000 for vans, sport utility vehicles and pickup trucks
• $55,000 for other vehicles

MSRP is the retail price of the automobile suggested by the manufacturer, including manufacturer installed options, accessories and trim but excluding destination fees. It isn't necessarily the price you pay.

You can find your vehicle's weight, battery capacity, final assembly location (listed as “final assembly point”) and VIN on the vehicle's window sticker.

You can check on qualifying vehicles by VIN at https://afdc.energy.gov/laws/electric-vehicles-for-tax-credit#/tab-2023

Or by Make/Model at https://fueleconomy.gov/feg/tax2023.shtml

Credit Amount:

The amount of the credit depends on when you placed the vehicle in service (took delivery), regardless of purchase date.

For vehicles placed in service January 1 to April 17, 2023:

• $2,500 base amount
• Plus $417 for a vehicle with at least 7 kilowatt hours of battery capacity
• Plus $417 for each kilowatt hour of battery capacity beyond 5 kilowatt hours
• Up to $7,500 total

In general, the minimum credit will be $3,751 ($2,500 + 3 times $417), the credit amount for a vehicle with the minimum 7 kilowatt hours of battery capacity.

For vehicles placed in service April 18, 2023 and after:

Vehicles will have to meet all of the same criteria listed above, plus meet new critical mineral and battery component requirements for a credit up to:

• $3,750 if the vehicle meets the critical minerals requirement only
• $3,750 if the vehicle meets the battery components requirement only
• $7,500 if the vehicle meets both

A vehicle that doesn't meet either requirement will not be eligible for a credit.

Please contact your tax preparer for how to claim the credit on your personal tax return.