The Inflation Reduction Act (IRA) provides new opportunities for consumers to save money on clean vehicles, offering multiple incentives for the purchase of electric vehicles (EVs), fuel-cell vehicles, and associated equipment such as chargers. These vehicles are more efficient than gas-powered vehicles, so you can save hundreds of dollars per year on fuel and significantly reduce pollution.
If you’ve been saving up to purchase a clean vehicle of your own, here’s what you should know.
Summary of Tax Credits for New and Used Clean Vehicles and Charging Equipment
Three new tax credits are available to individual purchasers of clean vehicles. To find out if your purchase will qualify, you’ll first need to decide whether you’re interested in a new or used vehicle. You’ll also need to know the vehicle model. Next, you can determine which of these credits applies to you:
- Up to $4,000 for buyers of qualified, previously owned clean vehicles.
| Purchasing a Used Clean Vehicle - Requirements | |
|---|---|
| Taxpayer income and status | The taxpayer’s modified adjusted gross income for either the current year or prior year must be $150,000 or less for joint filers and surviving spouses, $112,500 or less for head of household filers, or $75,000 or less for other filers. Taxpayer must not be a dependent that is claimed on another taxpayer’s tax return. |
| Taxpayer eligibility | Taxpayer has not claimed this credit in the past three years. (2023 is the first year that this credit can be claimed.) |
| Vehicle type and age | The vehicle is an electric vehicle, plug-in hybrid electric vehicle, or fuel cell vehicle, and the model year is at least two years earlier than the calendar year of your purchase. See the current list of eligible models. |
| Vehicle sale price and dealer | Vehicle costs $25,000 or less and is sold by a dealer registered with the IRS. |
| Previous transfer status | Vehicle has not already been transferred after August 16, 2022, to a qualified buyer other than the person who was the original user of the vehicle. Check the sales history of the vehicle and to learn more about the eligibility rules for previously owned clean vehicles. |
- Up to $7,500 for buyers of qualified, new clean vehicles. For this credit, there are two lists of qualified vehicles: those purchased in 2023 or later, and those purchased in 2022 or earlier.
| Purchasing a New Clean Vehicle - Requirements | |
|---|---|
| Taxpayer income | The taxpayer’s modified adjusted gross income for either the current or prior year must be $300,000 or less for joint filers and surviving spouses, $225,000 or less for head of household filers, or $150,000 or less for other filers. |
| Vehicle type | The vehicle is an electric vehicle, plug-in hybrid electric vehicle, or fuel cell vehicle. |
| Vehicle Manufacturer’s Suggested Retail price including options | The MSRP of a pickup truck, van, or SUV is $80,000 or less; for all other passenger vehicles, $55,000 or less. See here for current list of eligible models and applicable MSRP caps and here for details about optional equipment. |
| Vehicle assembly location | Assembly occurred in North America. Confirm this by asking your dealer for the Vehicle’s Identification Number (VIN) of the specific vehicle you have in mind and enter it on the AFDC's VIN decoder. |
| Battery sourcing criteria | When IRS issues additional guidance, expected in March, new rules on the sourcing of vehicle batteries will come into effect. These rules could change the amount of the credit that specific vehicles are eligible for. |
- Up to $1,000 toward the cost of a home EV charger in eligible locations. The IRS will publish further information on eligibility, but we know that credits are intended for residents of low-income communities and non-urban areas. Check back later to find out if your location qualifies.
In figuring out your eligibility for a clean vehicle tax credit, there are three more factors to consider: the timing of your purchase, your personal or household income level, and whether the vehicle itself is eligible.
How People Qualify for the Clean Vehicle Tax Credit
Income Restrictions
- For new clean vehicle purchases in 2023, your modified adjusted gross income (MAGI, see here for details) for either the current year or prior year must be:
- $300,000 or less, if you file taxes jointly with your spouse or are a surviving spouse
- $225,000 or less, if you file taxes as the head of a household
- $150,000 or less, for other filers
- For used clean vehicle purchases, your modified adjusted gross income for either the current year or prior year must be:
- $150,000 or less, if you file taxes jointly with your spouse or are a surviving spouse
- $112,500 or less, if you file taxes as the head of a household
- $75,000 or less, for other filers
Timing Restrictions
- If you bought a new, qualified clean vehicle in 2022 or before, you may still be eligible for a clean vehicle tax credit—but some restrictions apply. For a full summary of those restrictions, review this IRS guide. If you are buying a new clean vehicle January 1, 2023, or later, review this IRS guide. For both new and used clean vehicles, you must purchase before December 31, 2032, at which point the IRA’s clean-vehicle tax credits will expire.
How Vehicles Qualify for the Clean Vehicle Tax Credits
It’s important to keep in mind that not all clean vehicles are eligible for IRA tax credits. IRA contains various criteria that vehicles must meet to qualify for the clean vehicle tax credit, including where the vehicle was assembled, the size and sourcing of the vehicle battery, limitations on the manufacturer suggested retail price or MSRP, and other requirements. See the links below for more information about vehicle models from qualified manufacturers:
- Manufacturers and Models for New Qualified Clean Vehicles Purchased in 2023 or After
- Manufacturers and Models of Qualified Used Clean Vehicles
Visit the FuelEconomy.gov Tax Center to determine whether a vehicle qualifies for a tax credit, navigate eligibility requirements, and read frequently asked questions. You can also use the tax credit calculator to determine how much you can claim on a used vehicle.
Print out our buyer eligibility checklist and bring it with you to the dealership.
The IRS maintains and updates a list of new vehicles that qualify for tax credits of up to $7,500. As new rules take effect and manufacturers adapt to changing conditions in the clean vehicle market, it is likely that the list of eligible vehicles will change. So, as you make plans to purchase a clean vehicle, please remember to check irs.gov/cleanvehicles regularly.
How to Claim the New Clean Vehicle Tax Credit
Whether you purchase your clean vehicle before or after January 1, 2023, you can claim your tax credit when you file your taxes. Starting in 2024, eligible consumers will have the option to transfer the value of the tax credit to dealers that meet certain requirements in exchange for an equivalent reduction in the vehicle’s purchase price.
To find additional information about eligibility, the IRS maintains a list of frequently asked questions and answers, as well as a landing page with other resources you may need, such as tax forms. With these tools at your disposal, you’re well on your way to saving money with a clean, efficient vehicle, whether or not you qualify for the tax credit. Happy shopping!
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