You could save big on an electric vehicle purchase.

If you purchased a new or used electric vehicle in 2023 you could qualify for a tax credit up to $7,500 Although a relatively new tax credit, the Inflation Reduction Act that passed in 2022 guarantees money back on all new or used electric vehicle purchases. So, if you’re unfamiliar with the act and want to claim this credit, or recently purchased an electric vehicle continue reading below where we’ve outlined everything there is to know about it.

Income Eligibility

There is an income cap that determines who can claim the tax credit. For new electric vehicle purchases, anyone who is a single taxpayer who makes $150,000 is not eligible for it (measured using modified adjusted gross income). Those filing jointly must each make an adjusted gross income of $225,000 or less and earn less than $300,000 annually.

For used electric vehicle purchases, anyone who files as a single taxpayer and is making $75,000 or less will qualify for the credit. Couples filing jointly will be able to apply if they earn $150,000 or less.

The IRS also allows filers to use the income from the year the car is delivered or the year before the delivery. This means that if there was a shift in income and it fell below the income threshold for only one year, the purchase could still qualify.

Exceeding the Income Eligibility

For those that exceed the income eligibility threshold, there are a few tax strategies to get around the restrictions and still claim the credit. This can be done by lowering your taxable income throughout the year by putting money into a 401(k) contribution or an HSA or FSA.

It is important to note that filers can only claim the credit once every three years if it is the first transfer of the vehicle.

Car Model Qualifications

Only certain brands and models qualify for the credit. To help figure out if a vehicle qualifies, the IRS is urging taxpayers to use the FuelEconomy.gov website. The searchable list on this site is inclusive of every fully electric and plug-in hybrid vehicle that is eligible for a full or partial tax credit. Users of the site can filter vehicles based on the type, model, and year to see how much the car could qualify for.

Price Caps

To qualify for the tax credit, all used vehicles need to be less than $25,000. If a used vehicle falls within this threshold, and the buyer meets the income qualifications they could be eligible for a tax credit of up to $4,000 (or 30% of the car’s purchase price).

For all new vans, SUVs, and pickup trucks, the purchase price must be $80,000 or less. For all other types of vehicles (cars, sedans, etc.) the price cap is $55,000.

Other Restrictions

The IRS also lays out some manufacturing guidelines for which electric vehicles qualify. Used electric vehicles must be plug-in electric or fuel cells with at least six kilowatt hours of battery capacity. The vehicle must also weigh less than 14,000 pints, and be less than a two-year-old model.

Ultimately, if you’re thinking of purchasing a vehicle and want to save money on it, consider electric. Our dedicated staff is even able to help you determine how much you’ll be saving on the purchase.

So, whether you’d be interested in learning more, or knowing what credits you could qualify for, give us a call at 407-328-5001.’

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