Electric Vehicle Tax Credits in 2023
If you’re in need of a new vehicle and you’re willing to consider an electric car, now’s the time to make your move. That’s because thanks to changes from the Inflation Reduction Act of 2022, it’s easier than ever to get a tax credit with an EV purchase.
Before you make your purchase, it’s important to know what vehicles qualify for a tax return credit so you take full advantage of this program. Here’s a few things that you should keep in mind!
Any Clean Vehicle Qualifies
If you’re purchasing a vehicle that’s powered by a hydrogen fuel cell or by electric motors, you’re in luck. Under this program, either is eligible for up to $7,500 in a tax credit. Regardless of whether you buy new or used, your EV purchase will qualify as long as you’re buying for you and not buying for resale. If you’re planning to sell the car, you won’t be eligible for this tax credit.
You’re able to take the credit in the year that you physically obtain the vehicle. If you’re buying the car in 2023, you’ll be able to take the tax return credit when you file your taxes for 2023, which means you’ll see the savings on your taxes in 2024. Starting next year, you won’t have to wait for your tax return if you desire. You can instead pass the credit on to your dealer and have them knock that off the price you pay to the dealership. Either way, you’ll save substantially.
Your Income Can’t Be Too High to Qualify
This program is designed to help middle-class and working-class Americans afford electric vehicles. As such, if you’re single, you won’t be eligible for this tax credit if you make more than $150,000 a year in taxable income. If you’re married, you’ll be eligible if you make less than $300,000 a year.
You also can’t take advantage of this tax credit to get a big refund. This program is only designed to reduce the amount of tax you owe. If you owe $7,000 and purchase a qualified vehicle, you’ll get a $7,000 tax credit. While that means your tax bill will be settled, you also won’t get the remaining $500 as a refund.
The Government is Strict On What Qualifies
In order to qualify, your vehicle must have certain parts of the battery made either in the United States or in a country that has a free trade agreement with the United States. This is done in two pieces, so you could have a vehicle that qualifies for a partial refund based on where and how the battery is manufactured.
Your car dealer will be able to tell you exactly which vehicles are eligible and how much they’re eligible for you to receive. If you’re interested in taking this tax return credit on your next car purchase, talk to us. We’ll help you find the right EV for both your needs and your wallet!
Disclaimer — Please be aware that the above content is not intended to be financial advisement.