Electric Vehicle Credits for 2023 and Beyond

Electric vehicle credits for new vehicles. 2023 brought some changes to the rules for claiming federal tax credits for purchasing electric vehicles (EV). Some of those changes include:

• Qualifying vehicles must be assembled in North America.

• Increasing percentages of battery minerals and components must be sourced from the U.S. or from one of its free-trade partners.

• The manufacturer vehicle sales caps have been eliminated, meaning brands such as Chevrolet, Tesla and Toyota are eligible for EV credits again starting in 2023.

• Starting in 2024, buyers can take the EV tax credit directly at the point of sale rather than having to wait to claim it on their tax return.

Effective January 1, 2023, the following price and income limits apply:

Price limits for new vehicles:

• SUVs, vans and pickup trucks – $80,000

• Any other qualifying vehicle – $55,000

Income limits for new vehicles (based on MAGI):

• $300,000 – Joint returns or surviving spouse

• $225,000 – Head of household

• $150,000 – Any other filing status

Electric vehicle credits for used vehicles. A tax credit is also available for eligible used vehicles purchased from a dealer for $25,000 or less. The credit amount is 30% of the vehicle’s sale price, up to a maximum credit of $4,000. For this purpose, the credit is maxed out for vehicles purchased for $13,330 or more.

The credit is only available if you use the vehicle, rather than purchase it for resale. Those who qualify as your tax dependents do not qualify for the credit. You can only claim the credit for used vehicles once every three years, and it’s only allowed once for any vehicle.

To qualify for this credit, your modified adjusted gross income (increased by certain nontaxed foreign income) for either the sale year or the year preceding it is limited to the following:

• $150,000 or less on a joint return

• 112,500 for a head of household filer

• $75,000 for singles and married filing separately