July 2023 – Updates to Electric Vehicle Credit
ELECTRIC VEHICLE CREDITS: RECENT CHANGES
As we look ahead to 2023 tax planning, we wanted to reach out and provide information on the recent changes to the electric vehicle (EV) tax credit.
The IRS has offered a tax credit for purchasing certain new electric vehicles, but this credit was set to expire in early 2023. The Inflation Reduction Act of 2022 extended the EV tax credit by a decade until 2032, modified the credit qualifications, renamed the credit, and added a new credit for used vehicles.
New Name: Clean Vehicle Credit
The electric vehicle credit is now called the “Clean Vehicle Credit”, and it includes provisions for new vehicles, used vehicles, and commercial vehicles.
Changes to Credit Qualifications: Clean Vehicle Credit
For your planning, we wanted to provide a quick summary of the factors to keep in mind as you consider an EV purchase in 2023: where the car was assembled, battery quality, price, and your income.
– Going forward, it will be important to consider where the electric vehicle you purchase was assembled. Electric vehicles only qualify for the clean vehicle credit now if they were assembled in North America.
– Looking at battery quality, you will want to make sure the wattage is at least 7 kilowatt-hours. You will also want to make sure the vehicle meets the critical minerals requirement.
– Pricing on electric vehicles has an impact on credit eligibility. You can take the clean vehicle credit if you paid less than $55,000 for the vehicle (or less than $80,000 for vans, sport utility vehicles, and pickups).
– Finally, it is important to consider your own income. You are eligible for the clean vehicle credit if your modified adjusted gross income (MAGI) is less than $300,000 for joint filers, $150,000 for single filers. NOTE: you can use your MAGI from the year you take delivery of the vehicle or the year before, whichever one is less.
Used Clean Vehicle Credit
Beginning in 2023, the IRS has added a provision for the EV credit that includes used vehicles. The credit is $4,000 or 30% of the purchase price, whichever is smaller.
To qualify for the credit, the following items must be in place:
– The used vehicle must also generally meet the same requirements as the new vehicles need to for the clean vehicle credit.
– Taxpayer’s MAGI must be less than $150,000 for joint filers, $75,000 for others.
– The used vehicle’s model number must be at least two years earlier than the calendar year in which the taxpayer purchased it.
– The purchase price must be $25,000 or less.
– Please see this list of qualified vehicles as outlined by the IRS.
New Credit: Qualified Commercial Clean Vehicles
Starting January 1, 2023, businesses are eligible for EV tax credits. The credit is called the “Commercial Clean Vehicle Credit”. To qualify for the credit:
– The vehicle must be made by an approved manufacturer.
– The vehicle must be used for business and not bought for resale.
– The vehicle must be used primarily in the United States.
– Vehicles weighing less than 14,000 pounds must have a battery capacity of at least 7 kilowatt-hours.
– Vehicles weighing more than 14,000 pounds must have a battery capacity of at least 15 kilowatt-hours.
Conclusion
In summary, the EV credit has been updated. These updates extended the EV tax credit by a decade until 2032, modified the credit qualifications, renamed the credit, and added a new credit for used vehicles. While some changes are favorable, other changes might make credit eligibility more difficult. For more information, please visit the IRS FAQs here.
As always, please feel free to reach out to us with any questions regarding this information.
2022 Extended Filing Deadlines
SEPTEMBER 15, 2023 – Federal and state income tax returns are due for flow-through entities, including partnerships and S-Corporations if extended
OCTOBER 2, 2023 – Federal and state income tax returns are due for trusts if extended
OCTOBER 16, 2023 – Federal and state income tax returns are due for individual taxpayers, and C-Corporations if extended
Estimated Payment Deadlines
APRIL 18, 2023 – 1st quarter estimated payments for 2023 are due to the IRS and Colorado Department of Revenue
JUNE 15, 2023 – 2nd quarter estimated payments for 2023 are due to the IRS and Colorado Department of Revenue
SEPTEMBER 15, 2023 – 3rd quarter estimated payments for 2023 are due to the IRS and Colorado Department of Revenue
JANUARY 15, 2024 – 4th quarter estimated payments for 2023 are due to the IRS and Colorado Department of Revenue
EMPLOYEE SPOTLIGHT: KRISTOFER STEINBRECHER
Kristofer joined Soukup, Bush and Associates in October of 2022. He helps in preparing business and personal tax returns. He graduated in 2021 with a Bachelor of Science in Accounting from Regis University, and has been practicing tax preparation since 2017.
Always calling Colorado home, Kristofer has enjoyed time living on both coasts of the US. He returned to Colorado in 2011 to stay. A former chef, he enjoys spending his spare time cooking for family and friends, and spending time with his wife Brenna and their two cats.