How to Claim Clean Vehicle Tax Credits in 2023 and Beyond

How to Claim Clean Vehicle Tax Credits in 2023 and Beyond

If you’re thinking of buying a new or used clean vehicle, you might be eligible for some tax benefits. The Inflation Reduction Act of 2022 (IRA) has introduced some changes to the tax credits available for qualified plug-in electric drive motor vehicles and fuel cell vehicles. In this blog post, we’ll explain what these changes are, how they affect you, and how to claim your clean vehicle tax credits.


What are clean vehicle tax credits?

Clean vehicle tax credits are incentives that reduce your federal income tax liability if you buy or lease a new or used vehicle that meets certain environmental standards. These vehicles include plug-in electric vehicles (PEVs), which run partly or entirely on electricity, and fuel cell vehicles (FCVs), which use hydrogen to generate electricity.


The amount of the credit depends on the type, size, and battery capacity of the vehicle, as well as when you place it in service. The credit can range from $2,500 to $7,500 for new PEVs and up to $8,000 for new FCVs. For used clean vehicles, the credit can be 30% of the sale price up to a maximum of $4,000.


What are the new changes to the clean vehicle tax credits?

The IRA has made several changes to the clean vehicle tax credits that will take effect from January 1, 2023. Here are some of the main changes:

  • Fuel cell vehicles are now eligible for the same credit as plug-in electric vehicles, up to $7,500.
  • The buyer must meet certain income limitations to claim the full credit. The credit phases out for single filers with adjusted gross income (AGI) above $75,000 and joint filers with AGI above $150,000.
  • The final assembly of a new clean vehicle must occur within North America to qualify for the credit.
  • The vehicle can’t exceed a manufacturer suggested retail price (MSRP) of $80,000 for vans, sport utility vehicles and pickup trucks, or $55,000 for other vehicles.
  • The purchase of a new clean vehicle between 2009 and 2022 may also qualify for a tax credit, subject to different rules and limitations.
  • The IRA also added a credit for used clean vehicles, which can equal 30% percent of the sale price up to a maximum credit of $4,000. However, this recent credit doesn’t apply to used clean vehicles purchased before 2023.


How to claim your clean vehicle tax credits?

To claim your clean vehicle tax credits, you need to file Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit, with your federal income tax return. You also need to have proof of purchase or lease of the vehicle and its battery capacity.


If you bought a used clean vehicle after 2022, you also need to file Form 8910, Alternative Motor Vehicle Credit, and attach a copy of the bill of sale or other document showing the date and price of purchase.


You can find more information about the eligibility rules, income and price limitations, and how to claim the credit on this updated list of frequently asked questions from the IRS.


These credits are nonrefundable, which means that they can only reduce your tax liability to zero. You can’t get back more on the credit than what you owe in taxes. Plus, you can’t carry over any excess credit to future tax years.


Buying a new or used clean vehicle can be a great way to save money on gas and reduce your environmental impact. It can also help you lower your taxes if you qualify for the clean vehicle tax credits. However, these credits are subject to some changes and limitations that you need to be aware of before you make your purchase.


We hope this post has helped you understand how to claim your clean vehicle tax credits in 2023 and beyond. If you have any questions or need help with your taxes, feel free to contact us today.