Todd's Tax Service LLC
Electric Cars and Tax Credits
Todd's Tax Service LLC
New for 2023
Starting on January 1, 2023, the New qualified plug-in electric drive motor vehicle credit takes effect. Otherwise known as the "Clean Vehicle Credit", this credit differs substantially from the credit in place for purchases made through 12/31/22.
There is no manufacturer cap on the # of vehicles produced that qualify for the credit.
Final assembly of the vehicle must occur in North America.
The dealer must provide the buyer with certification that the vehicle qualifies for the federal tax credit. The VIN # must be entered on the IRS Form 8936 to qualify for the credit.
The calculation of the credit breaks down as follows:
Up to $3,750 for meeting critical mineral requirements.
Up to $3,750 for meeting the battery component requirement. (Total maximum credit is $7,500).
Credit reduces income tax liability after credits. Credit is nonrefundable. Unused credit may be carried forward.
It's possible that the credit can be taken at the dealership against the purchase price. The credit must still be reconciled on the buyer's (taxpayer's) tax return. Dealer participation and IRS readiness for this aspect of the credit will vary and are unknown at this time.
The credit only applies to taxpayers with modified adjusted gross income under $300,000 (MFJ), $225,000 (H of H), or $150,000 (single).
Additional IRS guidance is forthcoming regarding details needed to qualify for the clean vehicle credit.
I charge $50 to complete form 8936 and add it to your tax return.
A new commercial vehicle credit will also take affect for 2023 - up to $40,000. Tesla and other manufacturers are introducing fully electric semis that may qualify for this credit. Self employed truckers should contact their CPA or Enrolled Agent for more info. I do not prepare self employment forms or business returns for truckers.
It's hard not to notice that electric cars are the wave of the future. It's possible that purchasing a new electric car or a new hybrid vehicle could come with a federal tax credit.
The tax credit system for vehicles is extremely confusing. Vehicle manufactures have a limited number of vehicles that can be sold and qualify for the tax credit. Only certain vehicles qualify for the credit. The credit can be substantial if the vehicle qualifies. But so can the price of the vehicle be substantial.
I do NOT tell you if your vehicle will qualify for a tax credit. You must obtain that information in writing from the dealer. The credit is nonrefundable, meaning that it can be used to reduce your federal tax. Any unused credit can be carried forward to the next year.
With so many auto manufacturers getting on board with "all electric", it's hard not to jump on the bandwagon. Unfortunately, filling America's highways with electric vehicles is not going to solve our problems with environment and climate. Producing an electric car uses a lot of energy and natural resources. And no one really knows how plugging in millions of electric cars into our electric grid will impact our energy supply.
The biggest problem with electric cars is the batteries. Remember when you were a kid and your toy car stopped working? When you removed the battery cover on the back of the car, what did you find? Corrosion!
(I have no idea if life size cars will have this problem). I recently read a story about a guy in Europe who bought one of the first Teslas. Time came to replace the batteries and he was quoted $22,600 to replace the batteries. Click on the link to see what happened.
All information on the IRS site (link above) should be double checked with the dealer and the IRS. The site may or may not reflect current information.