Parkside Advisors

Independent Investment Management

The 2023 Clean Vehicle Tax Credit

by

Are you considering purchasing an electric or hybrid vehicle this year?

Brief Background

The Clean Vehicle Credit is one of the many new provisions from the Inflation Reduction Act passed into law in 2022. It modifies and replaces the popular Qualified Plug-In Electric Drive Motor Vehicle Credit that offered a $7,500 tax credit for qualifying vehicle purchases.

The new Clean Vehicle Credit was effective as of January 1, 2023 and offers a similar tax credit worth up to $7,500. However, Treasury Department regulations suggest it will be more difficult to receive the full $7,500 credit than before due to new critical materials and battery component rules.

Clean Vehicle Credit Overview

  • The $7,500 credit is available for qualifying vehicles purchased after April 17, 2023 if final assembly occurred in North America and the vehicle meets both the critical materials and battery component requirements. If the vehicle is assembled in North America but only meets one of the critical materials or battery component requirements, the credit is limited to $3,750. The Department of Energy maintains this website where you can look up the eligible credit amount by vehicle model.
  • Income limitations apply to buyers if their adjusted gross income (AGI) exceeds $300,000 for Married Filing Jointly, $225,000 for Head of Household, and $150,000 for other filers. No credit is allowed if the buyer’s income exceeds these limits.
  • Vehicle price limits are introduced. The MSRP of qualifying vehicles cannot exceed $55,000 for cars and $80,000 for vans, trucks, and SUVs.
  • Dealers can administer the tax credit starting in 2024. Buyers in 2023 will receive the credit when they file their 2023 tax returns. Next year, dealers will be allowed to reduce the purchase price by the credit amount when the vehicle is acquired.
  • Qualifying vehicles purchased between January 1, 2023 and April 17, 2023 occurred before the Treasury Department released guidance about the critical materials and battery component requirements. Accordingly, those buyers will use a separate calculation based on the vehicle’s battery capacity to determine the credit amount, up to $7,500. You can research the eligible credit amount if you’ve already purchased a qualifying vehicle this year between January 1, 2023 and April 17, 2023 on the Department of Energy’s dedicated website.
  • IRS introduces Used Clean Vehicle Credit which is effective January 1, 2023. Although similar in name to the Clean Vehicle Credit, the mechanics of the Used Clean Vehicle Credit are notably different. The Used Clean Vehicle Credit can be worth up to $4,000 for used vehicles purchased from a qualifying dealer. However, the credit requirements feature lower buyer income limits, lower vehicle price limits, vehicle age requirements, and other hurdles to qualify for the full credit. The Department of Energy maintains this website where you can look up qualifying used vehicles.

If you have questions about how the new federal Clean Vehicle Credit works in your specific situation, please contact Parkside Advisors.

Tweet
Pin
Share
0 Shares

NO INVESTMENT ADVICE
The material in this blog is for informational purposes only. You should not construe any such information or other content as legal, tax, investment, financial, or other advice. Nothing contained in our blog constitutes a solicitation, recommendation, endorsement, or offer by Parkside Advisors or any third party service provider to buy or sell any securities or other financial instruments in this or in in any other jurisdiction in which such solicitation or offer would be unlawful under the securities laws of such jurisdiction.

All material in this presentation is information of a general nature and does not address the circumstances of any particular individual or entity. Nothing in the presentation constitutes professional and/or financial advice to any specific firm client, nor does any information in this presentation constitute a comprehensive or complete statement of the matters discussed. Parkside Advisors does not become a fiduciary to any participant or other person or entity by virtue of any person’s use of or access to the presentation.

The content presented represents the interests and opinions of Parkside Advisors only. Blog content also may include material obtained from third party sources. We believe all content presented in the blog is reliable and current however we provide no guarantee of accuracy. You assume the sole responsibility of evaluating the merits and risks associated with the use of any information or other content in the blog before making any decisions based on such information or other content. In exchange for using the blog, you agree not to hold Parkside Advisors, its affiliates or any third party service provider liable for any possible claim for damages arising from any decision you make based on information or other content made available to you through this site.

INVESTMENT RISKS
There are risks associated with investing. Investing in stocks, bonds, exchange traded funds, mutual funds, and money market funds involve risk of loss. Principal loss is possible. Some high risk funds may use leverage, which will accentuate gains & losses. Foreign investing involves special risks, including a greater volatility and political, economic and currency risks and differences in accounting methods. A security’s or a firm’s past investment performance is not a guarantee or predictor of future investment performance.