Electric Vehicle Tax Credit for 2022, 2023
Theodor Vasile, Unsplash
The latest IRS tax credit updates on electric vehicle purchases:
Clean Vehicle Tax Credit 2023
As part of the Inflation Reduction Act (725 page PDF file) or IRA, the new EV tax credit has been reintroduced with some enhancements, now being called the Clean Vehicle Credit instead of the much longer Plug-In Electric Drive Motor Vehicle Credit.
The EV tax credit is still worth up to $7,500 and will be renewed to abide by the following guidelines in January of 2023 and will last for ten years through 2032. As many are noticing, due to inflation, there are currently few electric vehicles on the market which qualify for the credit due to the pricing restriction. Here are the key points of the Clean Vehicle Credit as part of the new bill set to go into effect in 2023:
- The credit is now claimed upfront or at the point of sale, going towards the cost of the car; this means the credit will be paid in advance and is nonrefundable. Qualified EV dealers and salespersons are to address the value of the allowed credit for the vehicle(s) in question prior to the sale. This means the EV tax credit can be used in the form of cash or as a partial payment or down payment towards the vehicle.
- If you claim the credit when buying the vehicle and were ineligible for it or your tax refund is subject to recapture, you may end up paying this credit back. In other words, advance payments of this credit are treated in the same manner as a tax refund would be treated.
- Because it is a tax credit, whether taken as a cash payment or paid directly towards the vehicle, this credit is not included in the gross income of the taxpayer and is not deductible for the dealer or salesperson.
- As a qualified buyer, you will put the vehicle into service, not resell it, and you will only claim this credit once in a three-year period.
- The 200,000 vehicle cap (described below) is being removed, thus certain Tesla and GM vehicles may qualify for the credit.
- In general, to qualify for the EV tax credit, the EV vehicle must:
- For 2023, in addition to the above requirements, an EV vehicle purchased after August 16, 2022 must also be assembled in North America and the critical materials for the battery must be from the U.S. or a country with whom the U.S. has a free trade agreement with. In general, North America includes the United States and Puerto Rico, Canada, and Mexico for purposes of determining the location of final assembly.
- If the EV vehicle was purchased on or before August 16, 2022, the final assembly requirement does not apply and you may qualify for the tax credit.
- If you entered a written binding contract to buy an EV vehicle before August 16, 2022, but took possession of the vehicle on or after August 16, 2022, and before January 1, 2023, you may claim the credit and disregard the assembly requirement.
To see if your vehicle meets the assembly requirements, check the Department of Energy's page on Electric Vehicles with Final Assembly in North America. On that page you can:
- Confirm the assembly location for your specific vehicle using the VIN Decoder tool under "Specific Assembly Location Based on VIN."
- Check a list of qualifying Model Year 2022 and early Model Year 2023 electric vehicles under "For Vehicles Purchased before January 1, 2023."
Because some models are built in multiple locations, you should check both criteria for any specific vehicle.
- The maximum MSRP or price of the vehicle must not exceed $55,000 for cars or $80,000 for SUVs, trucks, and vans. This means most Tesla vehicles will not qualify for the credit.
- To claim the credit, the purchaser's adjusted gross income cannot exceed $150,000 for the year for singles, $225,000 for heads of household, or $300,000 for married filing jointly to prevent wealthier Americans from taking advantage of additional tax savings.
- The credit will be made available for used electric vehicles through the Credit for Previously-Owned Clean Vehicles, limited to $4,000 for cars priced at $25,000 or less. This will have a lower income cap at $75,000 for singles, $112,500 for heads of household, or $150,000 for married couples. The vehicle must also be at least two years old, have a VIN, and must be a qualified sale through a dealer (person-to-person or private sales do not count).
- The credit can also be claimed for commercial vehicles through the Credit for Qualified Commercial Clean Vehicles which follows similar guidelines as described. The vehicle cannot get any "double benefit" - i.e., it cannot be claimed for both the Clean Vehicle Credit and the commercial credit (the VIN is required to prevent this).
- If you bought your vehicle in 2022, you may be able to claim this credit if the vehicle is assembled in the states and it is delivered to you after the bill is signed into law.
- The credit can only be claimed once per vehicle, meaning once it is claimed on a new vehicle based on the vehicle identification number or VIN, then it cannot be claimed again if sold as a used vehicle. This means the VIN is required to be reported on the tax return when reconciling the credit.
- Tip: Consider waiting until 2023 to purchase a new electric vehicle, especially if it is a qualifying Tesla or GM vehicle that would not qualify during 2022.
- You may also be able to claim a credit for installing an alternative fueling property for your vehicle through the Qualified Alternative Fuel Vehicle Refueling Property which includes EV charging stations. See details on energy efficient improvements to your home.
All of the above information also applies to plug-in hybrid vehicles.
Tax Credit for Buying a New Electric Vehicle or EV
Can I claim a tax credit for buying a new Tesla? What about a new Hyundai electric car? What if I bought a used Kia Electric Car?
If you purchased an electric or alternative motor vehicle in 2022, you may be able to claim credit on your 2022 Tax Return. You may also be able to amend a tax return to claim credit if you purchased it in a previous year and owed taxes. This tax credit is nonrefundable and will only offset your tax liability for a given tax year. The 2022 EV tax credit details can be found below; learn about the Tesla EV tax credit, Chevy Bolt EV credit, Nissan LEAF credit, and more of the best electric cars which may be eligible for this federal vehicle credit.
The Qualified Plug-In Electric Drive Motor Vehicle Credit, commonly referred to as the federal EV tax credit, can be worth up to $7,500 in nonrefundable credit.
These vehicle tax credits are available for 2022 Tax Returns:
This credit is also valid for qualifying plug-in hybrid electric vehicles.
When you prepare and e-File your 2022 Tax Return on eFile.com, you don't need to worry about which of the credits above you qualify to claim on your tax return. Simply answer a couple of questions and the eFile app will select the correct tax credit form(s) for you to complete. The app will also calculate and enter your credit amount on your return. See how much your 2022 refund in 2023 could be and prepare to prepare for Tax Day, April 18, 2023. Read on to learn more about these credits.
Qualified Plug-In Electric Drive Motor Vehicle Tax Credit
The first EV tax credits were introduced under President George W. Bush in 2008; previous presidents have kept them around and President Biden aimed to increase it, but has not passed anything during his presidency as of 2022. You may be able to claim a tax credit for placing a new, qualified plug-in electric drive motor vehicle into service. Generally, most electric vehicles qualify for the credit and all typically earn you the full amount of $7,500, but there are some criteria.
Key points on how the EV tax credit works:
- The vehicle was purchased new,
- It has a 5 kilowatt hour storage battery which is charged externally,
- The electric vehicle or EV weighs less than 14,000 pound, and
- The credit is being claimed for the year the vehicle was purchased and put into service.
This is a vehicle that, under IRS Section 30D, weighs less than 14,000 pounds, runs significantly by an electric motor, draws electricity from a battery that holds at least 4 kilowatt hours, and is capable of being recharged from an external source of electricity. This means it cannot be a traditional hybrid vehicle, or HEV, as it does not draw power externally. See information regarding hybrids and plug-in hybrids that may qualify for the credit.
The vehicle in question must be purchased new - it cannot be used and/or leased for you to receive the credit. The IRS tax credit for 2022 ranges from $2,500 to $7,500 per new electric vehicle (EV) purchased for use in the U.S. beginning on January 1, 2022. This nonrefundable credit is calculated by a base payment of $2,500, plus an additional $417 per kilowatt hour that is in excess of 5 kilowatt hours. This value cannot exceed $5,000, thus limiting the total credit to $7,500. (Note: a nonrefundable credit is an amount that only goes towards the taxpayer's tax liability. If you are expecting to owe $5,000 in taxes, but file for a $7,500 credit from a recently purchased electric car, you would expect to see $5,000, eliminating the difference of $2,500). This credit does not carry forward and must be used for the year it was purchased.
The electric car tax credit is similar to a rebate in that you cannot use it to purchase the vehicle, but can claim it after your purchase the vehicle. However, it is also unlike a rebate because it is not refunded you since nonrefundable tax credits can only be used to offset any taxes you may owe.
This credit can also be applied to a two-wheeled vehicle if certain circumstances are met. These are:
- The vehicle was purchased new,
- It can reach a speed of 45 miles-per-hour or more,
- It draws significant power from an electric motor,
- The battery has a minimum capacity of 2.5 kilowatt hours,
- It can be charged externally, and
- The vehicle weighs less than 14,000 pounds.
The credit for two-wheeled vehicle can be claimed for 10% of the cost of the vehicle in consideration up to a maximum of $2,500.
Does the Electric Vehicle Tax Credit Run Out?
The credit will begin to phase out when at least 200,000 qualifying vehicles manufactured by each company have been sold in the U.S. There are current efforts to eliminate this threshold - we will update this page if anything becomes law. As of October, 2022, the only two companies to begin phasing out are Tesla and General Motors. Once the process has begun, purchasers of electric vehicles are eligible to claim 50% of the credit if the vehicle was acquired in the first two quarters that the 200,000 limit had been reached. If filing for a vehicle purchased in the second two quarters, file for a nonrefundable credit amounting to 25% of the original amount. To see an example of this, find the amounts for General Motors or Tesla in the table below. Both Tesla and GM have finished this process; if you purchased either of these vehicles in 2022, they are not eligible for a tax credit.
Related: How to invest in Tesla stocks and other passive income ideas.
To claim the credit on eFile.com, you can prepare and eFileIT Form 8936 along with Form 1040. Once you answer a few simple questions about your tax situation, we will generate the forms for you and help you complete them accurately. If you bought a qualifying vehicle in the past six years and you did not claim it on your tax return, you can still get the credit by filing an amended return. Claim this credit when filing your 2022 Tax Return on eFile.com.
Additionally, the tax credit does not carryover or carry forward if you do not use it in the year you purchased the vehicle. In other words, if you did not use the part of the personal portion of the EV tax credit, then the unused credit is lost.
Vehicles that are Eligible for the Credit
All of the following electric vehicles qualify for the credit for Qualified Plug-In Electric Drive Motor Vehicles. They have different credit amounts depending on the power output of the battery:
AMP Electric Vehicles, Inc.
GCE and MLE (2012)
Audi of America, LLC
e-tron SUV (2019, 2021-2022); e-tron Sportback (2020-2022);
e-tron GT (2022); Q4 50 e-tron Quattro
Azure Dynamics, Inc.
Transit Connect Electric Vehicle (2011, 2012)
BMW of America
i3s and i3 Sedan (2014-2021);
i4 eDrive 50 and i4 M50 Gran Coupe (2022);
iX xDrive50 (2022); iX M60 (2023)
BMW of America
MINI Cooper S E Hardtop (2-Door) (2020-2022)
Boulder Electric Vehicles, Inc,
Delivery Van DV-500 (2013);
Electric Shuttle DV500 (2013);
Electric Flat Bed DV-500 (2013);
Electric Service Body DV-500 (2013)
e6 Electric Vehicle (2012-2017)
Sedan (2010, 2012)
Electric Last Mile Solutions (ELMS) Inc.
ELMS Urban Delivery (2022)
Electric Mobile Cars LLC
E36 7 Passanger Wagon, E36t Pick-up Truck, E36v Utility Van (2010)
Electric Vehicles International
(EVI)-MD (Medium Duty) Electric truck (2011-2012);
EVI-WI (Walk-In) Electric truck (2011-2012)
Electronic Motor Cars
EMC Model E36 7 Passenger Wagon (2010);
Model E36t Pick-Up truck (2010);
Model E36v Utility Van (2010)
FCA (Fiat, Chrysler Automobiles) North America Holding, LLC.
Fiat 500e (2013-2020)
Ford Motor Company
Focus EV (2012-2018)
Mustang Mach-E (2021)
E-Transit (2022); F-150 Lightning (Standard, Extended Range) (2022)
General Motors, LLC.
Chevrolet Bolt (2017-2020);
Chevrolet Spark EV (2014-2016);
*$$7,500 if acquired through 3/31/2019;
$3,750 (4/1/2019 - 9/30/2019);
$1,875 (10/1/2019 - 3/31/2020)
Ioniq Electric (2017-2021); Ioniq 5 (2022);
Kona EV (2019-2022); Genesis GV60 (2023)
Jaguar Land Rover North America, LLC.
I-Pace (First Edition, HSE, SE, S models) (2019-2023)
EX3 (2019-2021); K22 (2019-2020);
K23 (2020 - 2022); K27 (2020-2022)
Kia Motors America, Inc.
Soul Electric (2015-2020); NIRO EV (2019-2022);
Lucid Group, Inc.
Air (Dream Edition, Grand Touring) (2022)
Mercedes-Benz USA, LLC
Smart USA Distributor, LLC
B-Class EV (B250e) (2014-2017);
AMG EQS Seddan, EQU 450+, EQS 580 4Matic (2022)
smart fortwo EV (2013-2018);
smart EQ fortwo Cabrio (2019);
smart EQ Fortwo Coupe (2019)
Mitsubishi Motors North America, Inc.
i-MiEV (Electric Vehicle) (2012, 2014, 2016, 2017)
Nissan North America
Polestar Automotive USA Inc.
Polestar 2 (2021-2022)
Porsche Cars North America, Inc.
Taycan EV (4S, Turbo, S) (2020);
Taycan EV (all models) (2021)
Rivian Automotive, LLC
R1T, R1S, EDV 700 (2022)
Subaru of America
Roadster (2018-2011); Model S (2012-2019);
Model X (2016-2019); Model 3 Standard Range (Plus) (2019-2020);
Model 3 Long Range (2017-2019);
Model 3 Long Range AWD and AWD Performance (2019);
Model 3 Mid Range (2018-2019)
$7,500 if acquired through 12/31/2018;
$3,750 (1/1/2019 - 6/30/2019);
$1,875 (7/1/2019 - 12/31/2019)
Think City EV (2011)
Toyota Motor Sales, U.S.A., Inc.
RAV4 EV (2012-2014)
Volkswagen Group of America
ID.4 (First, Pro, Pro s) (2021)
Volvo Cars of North America, LLC
XC40 Recharge Pure Electric P8 AWD (2021-2022)
Wheego Electric Cars, Inc.
LiFe EV (2011)
Zenith Motors, Inc.
Electric Van (2014-2017); Electric Minibus (2016-2017)
*Companies who have initiated phasing out indicate different, decrementing values based on the year purchased. Currently, only General Motors and Tesla have begun this process which has been completed, making them no longer eligible for the credit for vehicles purchased in 2022.
See a list of qualifying plug-in hybrids.
In addition to these nonrefundable credits, different states offer rebates to encourage taxpayers to invest in electric vehicles. For example, California offers an EV tax credit in the form of a cash rebate up to $7,000 for a taxpayer who purchases a new electric vehicle. This is the state's Clean Vehicle Rebate Program or CVRP which is good for plug-in hybrid vehicles, battery electric vehicles, and fuel cell electric vehicles.
Should an electric vehicle be purchased for business purposes, it may be eligible for the credit and claimed on Form 3800, General business Credit - eFileIT.
In 2021, United States electric vehicle sales grew to over 430,000 units in the year, increasing from 2020. In 2020, the number of EV or electric vehicles decreased to 322,000 from 2019 where around 329,000 electric vehicles were sold, all according to the U.S. Department of Energy. Some of the most popular all electric vehicles were from Tesla, including the Model 3, Model X, and Model S, with the Model 3 selling almost 300,000 units in 2018 and 2019 combined. The Nissan Leaf sold more than 10,000 units in each year, 2018 and 2019.
Do you own any of the vehicles in this list or want to invest in one? Get the most out of that purchase when you file your taxes for 2022. Claim the credit online on Form 8936 - eFileIT on eFile.com.
Charging Costs and Electric Vehicles
How much does it cost to charge a Tesla? Can you charge an electric vehicle overnight at home?
Depending on the state, electric car charging stations can be found in more populated areas of the U.S. where more EVs are present. Owners can also charge their Tesla or other electric car at home. How long it takes to charge an electric car and how much it costs depends on the charging conditions.
Most all-electric vehicles have similar battery storage sizes, so they all require the same power output to charge and will take similar amounts of time to fully recharge. The cost to charge an electric vehicle depends on the storage of the battery. For example, the Tesla Model X has a 100 Kilowatt hour (kWh) battery. Assuming the average cost of electricity in the United States of around 14 cents per Kilowatt hour ($0.14/kWh) according to the Energy Information Administration or EIA, the cost my vary based on the charging set up. Additionally, there is power loss in AC chargers, typically resulting in an efficiency of 80-90%. The examples below assume charging from a power level of 0 to 100 or full charge.
- Level 1 AC charging
- Standard, universal charging from a common home outlet or wall socket. The charge will take days instead of hours which is much longer in comparison to level 2 AC charging. This can be anywhere from 20-40 hours and will add up to $14.00 for a full charge or more if accounting for lost power. Depending on how often the vehicle is used and charged, consider this when purchasing an electric vehicle you plan to charge at home.
- Level 2 AC charging
- Offered by Tesla as well as other third party manufacturers. These chargers are similar to an outlet used for an at-home dryer or other large appliance and can be simply installed by an electrician or other specialist. Tesla and other companies recommend installing this type of charger at home. Charging with a level 2 system can charge overnight, or around 8-12 hours for a full charge up to $14.00 in electricity. The amount does not vary since the cost is based on how much power is output into the battery, not the amount of time it is charged.
- Level 3 DCFC or Tesla Supercharger
- DCFC or direct current fast chargers abandon the alternating current (AC) method and require much more power, but offer far superior charging speeds at under an hour. Since this requires more power, the average cost for this electricity increases, according to the EIA, to around $0.22 or 22 cents per kWh. The charging is much more efficient at around 90-99%. Using the Model X, this would be around $23.00 to fully charge at 100 kWh.
With widespread competition, electric vehicle range in prices. There are Kia electric cars, electric vehicles from BMW, and the well-known Tesla. Consumers may be able to purchase electric vehicles for prices they are used to for traditional gas vehicles, like the cheapest electric cars in 2022 starting at $30,000. This goes up to the most expensive electric vehicles like those from Porsche, Audi, and Mercedes-Benz which may start at around $100,000.
Alternative Motor Vehicle Tax Credit
The Alternative Motor Vehicle Tax Credit can be claimed for placing a qualified fuel cell vehicle in service and may only be claimed by the original purchaser of the vehicle. A qualified fuel cell motor vehicle is a vehicle propelled by power from one or more cells which convert chemical energy directly into electricity. Currently, hydrogen fuel cell electric vehicles qualify. The credit can be claimed for cars purchased in 2015 - 2022. eFile.com can be used to generate the information for Form 8910 - FileIT - to claim the credit and attach it to your 2022 Tax Return. You can prepare and file these forms on eFile.com. Once you answer a few simple questions about your tax situation, we will generate the forms for you and help you complete them accurately.
For Tax Year 2022, only partnerships and S corporations should report it on Form 3800, General Business Credit. Other taxpayers, when filing on eFile.com, will use the eFile app to report the information on Form 8910, Alternative Motor Vehicle Credit.
Below is a list of some certified fuel cell motor vehicles that may qualify for the credit:
- 2008-2012 Honda FCX Clarity
- 2016 Honda Clarity Fuel Cell
- 2018-2022 Hyundai Nexo
- 2020-2022 Toyota Mirai II
- Hyundai Xcient Fuel Cell
Refer to the vehicle's manufacturer for certification of the vehicle's status as a qualified alternative motor vehicle. The manufacturer should be able to provide a copy of the certification letter from the IRS.
Similarly to electric vehicles, states offer incentives for purchasing alternative motor vehicles. California, for example, may offer a rebate worth up to $4,500.
Find out how to claim tax credits for energy-efficient improvements to your home or other home improvement deductions. In addition, see other tax credits and tax deductions that you may qualify to claim on your tax return. When you prepare and e-file your return on eFile.com, the eFile app will select and enter any deductions and credits you qualify for on your tax return. Claim your EV tax credit for 2022 on eFile.com; contact eFile.com support if you have further questions or need more help with your 2022 Tax Return.
See also: Can I claim a tax credit for a hybrid or plug-in hybrid?
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