Purchasing a new electric vehicle (EV) or fuel cell vehicle (FCV) in 2023 or later might make you eligible for a significant clean vehicle tax credit. This incentive aims to make environmentally friendly vehicles more accessible. To understand if you qualify, refer to Publication 5866, New Clean Vehicle Tax Credit Checklist PDF.
Upon completing a sale, sellers are obligated to provide you with details regarding your vehicle’s eligibility. They are also required to register online and report this information to the IRS. Failure to comply from the seller’s side will disqualify your vehicle for the tax credit. Further details are available in Publication 5905, Information for Consumers Purchasing a New or Used Clean Vehicle PDF.
You can also explore information on credits for used clean vehicles, qualified commercial clean vehicles, and new plug-in EVs bought before 2023.
Who is Eligible for the 2023 Clean Vehicle Credit?
Individuals and businesses can potentially qualify for a tax credit of up to $7,500 under Internal Revenue Code Section 30D when buying a new, qualifying plug-in EV or FCV. The Inflation Reduction Act of 2022 brought changes to the rules governing this credit for vehicles purchased between 2023 and 2032.
To be eligible for this 2023 car tax credit, you must meet certain criteria:
- The vehicle must be purchased for your personal use and not for resale purposes.
- The vehicle must be used primarily within the United States.
Furthermore, your modified Adjusted Gross Income (AGI) must not exceed the following thresholds:
- $300,000 for those married filing jointly or qualifying widow(er)s
- $225,000 for heads of households
- $150,000 for all other filing statuses
Eligibility is determined by your modified AGI from either the year you take delivery of the vehicle or the preceding year, whichever is lower. If your modified AGI falls below the specified limit in either of these years, you are eligible to claim the clean vehicle credit for your 2023 car purchase.
It’s important to note that if you choose not to transfer the credit, it is nonrefundable when you file your taxes. This means the credit amount cannot exceed your tax liability, and any excess credit cannot be applied to future tax years.
Understanding the 2023 Clean Vehicle Credit Amount
The credit amount is determined by the date the vehicle is placed in service (delivery date), irrespective of the purchase date. For 2023 Cars, the calculation varies based on when the vehicle was put into service.
Vehicles Placed In-Service January 1 to April 17, 2023:
For vehicles placed in service during this period, the clean vehicle credit was calculated as follows:
- Base amount: $2,500
- Additional $417 for vehicles with at least 7 kilowatt-hours of battery capacity
- Plus, an additional $417 for each kilowatt-hour of battery capacity exceeding 5 kilowatt-hours
- Total credit capped at $7,500
In most cases, the minimum credit was $3,751 ($2,500 + 3 times $417), applicable to vehicles with a minimum battery capacity of 7 kilowatt-hours.
Vehicles Placed In-Service April 18, 2023 and After:
For vehicles placed in service on or after April 18, 2023, the eligibility criteria expanded to include new critical mineral and battery component requirements. For these 2023 cars, the credit is structured as:
- $3,750 if the vehicle meets the critical minerals requirement only
- $3,750 if the vehicle meets the battery components requirement only
- $7,500 if the vehicle meets both requirements
Vehicles failing to meet either of these new requirements are not eligible for a clean vehicle credit.
Criteria for Qualified 2023 Cars
To determine if a 2023 car qualifies for the clean vehicle tax credit, several conditions must be met. You can check the eligibility of specific vehicles by visiting fueleconomy.gov.
A qualifying vehicle must:
- Possess a battery capacity of at least 7 kilowatt-hours.
- Have a gross vehicle weight rating (GVWR) under 14,000 pounds.
- Be manufactured by a qualified manufacturer.
- Undergo final assembly in North America.
- Meet critical mineral and battery component requirements (effective April 18, 2023).
Furthermore, the sale conditions stipulate that:
- The vehicle must be purchased new.
- The seller must report necessary information to both the buyer at the time of sale and to the IRS.
Additionally, the vehicle’s Manufacturer Suggested Retail Price (MSRP) cannot exceed:
- $80,000 for vans, sport utility vehicles, and pickup trucks
- $55,000 for other vehicle categories
MSRP includes manufacturer-installed options, accessories, and trim but excludes destination fees and is not necessarily the final price paid. Vehicle weight, battery capacity, final assembly location (listed as “final assembly point”), and VIN can be found on the vehicle’s window sticker.
Claiming Your 2023 Clean Vehicle Tax Credit
To claim the clean vehicle tax credit for your 2023 car, you need to file Form 8936, Clean Vehicle Credits with your annual tax return. You will be required to provide the vehicle’s VIN on this form.
Obtain a Time-of-Sale Report
Upon completing your vehicle purchase, the dealer is required to provide you with a paper copy of a time-of-sale report.
- Retain this report for your records as it confirms that the dealer has reported the sale information to the IRS.
- If you do not receive this report, consult the step-by-step guide for guidance.
File Form 8936 with Your Tax Return
You must complete and submit Form 8936 when filing your tax return for the year you took delivery of the 2023 car. This applies whether you transferred the credit at purchase or intend to claim it upon filing. For any queries, detailed instructions are available in the step-by-step guide.
Related Information
Used Clean Vehicle Credit
Commercial Clean Vehicle Credit
Credits for new electric vehicles purchased in 2022 or before
