TAS Tax Tip: Clean Vehicle Credits
TAS Tax Tip: Clean Vehicle Credits
In the business of selling cars? Looking at buying a clean vehicle? Clean Vehicle Credits can help you maximize your return at tax time.
The Inflation Reduction Act of 2022 (IRA) makes several changes to the tax credit provided in Internal Revenue Code (IRC) § 30D for qualified plug-in electric drive motor vehicles, including adding fuel cell vehicles to the § 30D tax credit. The IRA also added a new credit for previously owned clean vehicles under IRC § 25E. Beginning on January 1, 2024, the credits may be applied at the point of sale for the customer to reduce the cost of the purchase by the amount of the credit. Eligible taxpayers do not need to wait until filing season!
Clean vehicle credits are nonrefundable credits meant to lower the cost of qualifying plug-in electric or other “clean” vehicles. In Tax Years 2023-2032, the credit is up to $4,000 for previously owned clean vehicles and up to $7,500 for new clean vehicles. There are certain requirements for qualified vehicles, including the vehicle’s weight, manufacturer, assembly location, suggested retail price, mineral and battery component requirements, etc. See irs.gov for more information. In addition, eligible taxpayers need to meet certain ownership, use, and modified adjusted gross income (AGI) requirements. These credits are available to any vehicles acquired before December 31, 2032.
Dealers and Sellers of clean vehicles
On October 23, 2023, the IRS launched its Energy Credits Online tool encouraging qualified dealers and sellers to register using an online portal.
As stated above, qualified customers are generally eligible for up to $7,500 credit on new and $4,000 on used qualified clean vehicles. Timely registration will allow an immediate financial benefit to the vehicle buyer at the time of sale, which can be applied to reduce the cost of the purchase by the amount of the credit, and may help increase sales by registered dealers.
The IRS will promptly issue advance payments via direct deposit. The IRS anticipates deposits will typically occur within 48 – 72 hours of a successfully submitted time of sale report and advance payment request by the dealer. Registered dealers can begin receiving transferred new or used clean vehicle tax credits from eligible buyers on January 1, 2024.
Eligible dealers and sellers must use the Online Energy Credit Portal to register with the IRS. Licensed dealers can also register to receive advance payments to offset the amount of a tax credit that was applied toward a buyer’s purchase price.
Dealers/Sellers
How do I register my dealership?
1.) Register for an ID.me account.
2.) Provide Employer ID Number (EIN).
3.) Provide business name and mailing address.
4.) Add dealer’s license number, bank routing and account numbers.
The registration process for dealers and sellers is quick and easy! Be sure to verify that your account indicates “Success” at the conclusion of registration. Starting for vehicles placed in service January 1, 2024, or later, buyers will only be able to claim credits if the seller has registered with the IRS and successfully submits a seller report through the IRS Energy Credits Online. All dealers and sellers must submit seller reports through IRS Energy Credits Online for vehicles placed in service beginning January 1, 2024. Thus, it is important to register with the IRS through the portal before that deadline.
For step by step guidance refer to the IRS’s Video, How Dealers and Sellers Register for Energy Credits Online.
Buyers of Clean Vehicles
Individuals and business can learn more about credit eligibility and vehicle qualifications at irs.gov.
Who qualifies for the new clean vehicle credit:
Vehicle MUST be for own use, cannot resell.
Primarily used in the United States.
AGI $300,000 or less for married filing jointly.
AGI $225,000 or less for head of households.
AGI $150,000 or less for all other filers.
Who qualifies for a used clean vehicle credit:
Vehicle MUST be for own use, cannot resell.
NOT the original owner.
NOT claimed as a dependent.
Have NOT previously claimed a clean vehicle credit (within last 3 years).
AGI $150,000 or less for married filing jointly.
AGI $112,500 or less for head of household.
AGI $75,000 or less for all other filers.
If you meet these qualifications, are in the market, or have purchased a new or used clean vehicle it’s imperative that you verify your New Clean Vehicle Eligibility or Used Clean Vehicle Eligibility.
For more updates from the Taxpayer Advocate Service (TAS) on clean vehicle credits and other helpful tax tips, monitor the TAS news and information center to read the latest tax tips, blogs, alerts, and more.
Additional Resources:
Used Clean Vehicle Credit | Internal Revenue Service (irs.gov)
Commercial Clean Vehicle Credit | Internal Revenue Service (irs.gov)
Credits for New Electric Vehicles Purchased in 2022 or Before | Internal Revenue Service (irs.gov)
https://www.irs.gov/pub/irs-drop/rp-23-33.pdf
Revenue Procedure 2023-33, https://www.irs.gov/credits-deductions/clean-vehicle-credit-qualified-manufacturer-requirements
IRS Publication 5863 (10-2023), https://www.irs.gov/pub/irs-pdf/p5863.pdf
The post TAS Tax Tip: Clean Vehicle Credits appeared first on Taxpayer Advocate Service.