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Home » Home & Crafts » Unlocking the Secrets of Electric Vehicle Tax Credit

Unlocking the Secrets of Electric Vehicle Tax Credit

Maximize Your Savings: A Comprehensive Guide to Understanding the Tax Credit for Electric Vehicles

by Nvindi
26/04/2023 13:27
in Home & Crafts
Secrets of Electric Vehicle Tax Credit

Secrets of Electric Vehicle Tax Credit

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The US government incentivizes a transition to environmentally-friendly vehicles by providing taxpayers with a credit on their tax returns for purchasing a qualified plug-in hybrid or fuel-cell vehicle, as per IRS Code Section 30D. This credit is aimed at discouraging the use of gas-powered cars. Let’s try to better understand this situation and how it can affect your pocket if you own an electric car.

The EV tax credit, also referred to as the clean vehicle credit, amounts to $2,917 for electric vehicles with a battery capacity of 5 kilowatt hours (kWh) or more. An additional $417 credit is awarded for each kWh of capacity exceeding 5 kWh, with a cap of $7,500. However, the credit is nonrefundable and cannot exceed the taxpayer’s tax liability.

Electric Vehicles Eligible for Tax Credit in 2022: What Are Your Options?

In order to be eligible for the tax credit on your 2022 tax return, you must have purchased an electric vehicle before Jan. 1, 2023, and it should be primarily driven in the US for personal use. The vehicle should also have an external charging source and a gross vehicle weight rating under 14,000 pounds. Suppose you bought an electric vehicle last year, it must have been manufactured by a company that has sold fewer than 200,000 EVs in the US to be eligible for the credit.

Secrets of Electric Vehicle Tax Credit
Secrets of Electric Vehicle Tax Credit

As a result, 2022 models from Tesla and Ford would not qualify, but this requirement has been lifted for the year 2023. Moreover, if you purchased your electric vehicle between August 17 and December 31, 2022, the final assembly of the vehicle must have taken place in North America. The IRS provides confirmation that you are exempted from the final assembly requirement if you signed a written contract for your electric vehicle after December 31, 2021, but before August 17, 2022. Nevertheless, it is advisable to validate this exemption with the IRS or a tax specialist.

How can I apply for the EV tax credit on my tax return?

The Department of Energy’s Alternative Fuels Data Center website provides a list of authorized 2022 car models. You may also check your vehicle’s identification number (VIN) on the Department of Energy website. It’s worth noting that some manufacturers have hit the maximum number of EVs they can sell while still qualifying for the full credit.

If you acquired an EV in 2022 and want to claim the credit, you must file IRS Form 8936 along with your 2022 tax return. You’ll have to provide your vehicle identification number (VIN) as well. What happens if I purchased an EV before 2022 but didn’t apply for the credit? In case you didn’t claim the credit for an electric vehicle bought before 2022, you can potentially request it by submitting an amended return for the tax year you acquired the vehicle.

Tags: MoneyTax
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