Tax law changes for electric vehicles - Palma Financial

There are pros and cons to getting an electric or plug-in hybrid car

PROS: A wholly revamped tax credit for electric vehicles that starts in 2023 and continues through 2032, enacted by The Inflation Reduction Act.

CONS: The credit comes with many new restrictions, now called the clean vehicle credit.

At a maximum of $7,500, the clean vehicle credit remains. But beginning in 2023, to qualify for the credit, you will need the following:

  1. An adjusted gross income of $300,000 or less for married filing jointly or $150,000 or less for singles; and
  2. Buy an electric vehicle with a manufacturer’s suggested retail price below $80,000 for vans, SUVs, and pickup trucks or $55,000 for other vehicles.

But that’s not all. The 2023 credit includes new domestic assembly and battery sourcing requirements.

The new law eliminates the credit when the vehicle fails the battery sourcing requirements, and electric vehicles will only qualify for part of the $7,500 credit.

The new credit allows more electric vehicles to be manufactured. It will help popular electric vehicles manufactured by GM, Toyota, and Tesla qualify for the new credit if they meet the price cap and other requirements.

When purchasing a used electric vehicle from a dealer (not an individual), you can qualify for a credit of up to $4,000 starting in 2024, but income caps also will apply to this credit.

Commercial Vehicle Credit

If you buy an electric vehicle for business use in 2023, you have a second option: the commercial clean vehicle credit.

In 2024, you can benefit from the credit immediately by transferring your credit to the dealer for a cash rebate or price reduction; rather than waiting until you file your taxes.

Want to discuss tax credits? Let’s Talk!

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