Generally, when talking about federal electric vehicle tax credits in the United States, most people refer to the New Electric Vehicle Credit. But that’s not the only federal tax credit for buying an electric vehicle. Starting in 2023, there are two new electric vehicle tax credits: The Used Clean Vehicle Credit and the Clean Vehicle Trade Credit.

A new clean vehicle is a clean vehicle placed in service on or after January 1, 2023, acquired by a taxpayer for its original use. In addition, to qualify for the credit, the vehicle cannot be acquired for resale, must be manufactured by a qualified manufacturer, and must have final assembly in North America.

As of the above date, qualifying vehicles will be eligible for a tax credit of up to $7,500. It is important to note that this credit is non-refundable, that means you cannot receive more money from the credit than you owe in taxes. You also cannot reinvest the remainder in any taxes owed in the future.

Multiple taxpayers may acquire, place in service and own the same vehicle. However, only one taxpayer may claim the clean new vehicle credit per vehicle placed in service, and the credit may not be allocated or prorated among multiple taxpayers.

You may not claim the credit if your modified adjusted gross income (AGI) exceeds certain thresholds. This limitation is based on the lesser of your modified AGI for the year that the new clean vehicle was placed in service or for the preceding year. The relevant modified AGI thresholds are as follows:

• Married filing jointly or filing as a qualifying surviving spouse or a qualifying widow(er) – $300,000
• Head of household – $225,000
• All other taxpayers – $150,000

The vehicle will not be eligible for the credit if the manufacturer’s suggested retail price (MSRP) of the vehicle exceeds the following values:

• Vans, Sport utility vehicles, Pickup trucks: $80,000
• Other – $55,000

The Previously Owned Clean Vehicle Credit is a credit of up to $4,000 for the purchase of an eligible previously owned clean vehicle with a sale price of $25,000 or less that is placed in service during a tax year by a qualified buyer. To claim the credit, a qualified buyer must meet certain income requirements and it must be the vehicle’s first qualified sale since Aug. 16, 2022, other than to the original owner.

A previously owned clean vehicle is a motor vehicle that meets the following requirements:

1. The model year of the vehicle is at least two years earlier than the calendar year in which a taxpayer acquires the vehicle.
2. The purchasing taxpayer is not the original user of the vehicle.
3. The vehicle was acquired for a sales price of $25,000 or less from a dealer and the purchasing taxpayer is the first qualified to claim the credit since Aug. 16, 2022, other than its original user.

To qualify for the deduction, you must:

• Be an individual who bought the vehicle for use and not for resale
• Not be the original owner
• Not be claimed as a dependent on another person’s tax return
• Not have claimed another used clean vehicle credit in the 3 years before the purchase date

In addition, your modified adjusted gross income (AGI) may not exceed:

• $150,000 for married filing jointly or a surviving spouse
• $112,500 for heads of households
• $75,000 for all other filers

To qualify for the credit, the previously owned clean vehicle must be purchased from a dealer.

Like the new clean vehicle credit, the used clean vehicle credit cannot be carried forward and is not refundable.

A taxpayer can claim a Qualified Commercial Clean Vehicle Credit for purchasing and placing in service in the taxpayer’s business a “qualified commercial clean vehicle” during the taxable year. The taxpayer must use the vehicle for a “business use.”

A “qualified commercial clean vehicle” is defined as any vehicle of a character subject to the allowance for depreciation that is made by a qualified manufacturer, acquired for use or lease by the taxpayer and not for resale and treated as a motor vehicle is manufactured primarily for use on public streets, roads and highways 

This tax credit, which can be claimed by businesses and tax-exempt organizations, is worth up to:

• $7,500 for qualified vehicles with gross vehicle weight ratings of less than 14,000 lbs.
• $40,000 for all other vehicles.

It is equal to the lesser of:

• 30% of your basis in the vehicle (total cost after taxes and registration).
• The incremental cost of the vehicle (excess of the purchase price versus a comparable internal combustion engine vehicle)

At My Accounting Now we will help you claim any of the current or new tax credits for electric vehicles. Schedule a consultation with our team, we will clarify all your doubts. Call us at 786-228-8689 or send us an email to info@myaccountingnow.com