New Tax Provisions
Clean vehicle credit. The tax credit for qualified plug-in electric vehicles has been significantly revised by the Inflation Reduction Act (IRA). The plug-in vehicle credit has been renamed the “clean vehicle credit.”
For the period August 16, 2022 through the end of the year, the prior rules still apply with the addition that the final assembly of the vehicle must occur in North America. The prior rules had caps on the number of qualifying vehicles. Please consult the Department of Energy’s website for qualifying vehicles.
For years after 2022, the manufacturer limitation on the number of vehicles eligible for the credit has been eliminated.
In addition, the IRA changes how the credit is calculated. Specifically, a vehicle must meet critical mineral and battery component requirements.
There are also new price and income limitations. The credit isn’t allowed for a vehicle with a manufacturer’s suggested retail price above $80,000 for vans, sport utility vehicles and pickups, and above $55,000 for other vehicles. The credit isn’t allowed if a taxpayer’s modified adjusted gross income (MAGI) for the current or preceding tax year exceeds $150,000 for single filers, $300,000 for married couples filing jointly and $225,000 for heads of household.
A couple other requirements, the vehicle’s VIN must be included on your tax return and the seller is required to provide information to the buyer and the IRS, providing information on the vehicle’s qualifications and maximum credit allowable.
Finally, the IRA contains a tax credit for a used plug-in electric drive vehicle purchased after 2022. The tax credit is $4,000 or 30% of the vehicle’s sale price, whichever is less. The vehicle must be purchased from a dealer and be less than $25,000. The credit isn’t allowed if a taxpayer’s modified adjusted gross income (MAGI) for the current or preceding tax year exceeds $75,000 for single filers, $150,000 for married couples filing jointly and $112,500 for heads of household.
Home energy improvements. Prior to 2023, individuals could receive credits for energy efficient improvements to their primary residence. These residential energy property improvement credits were capped at a $500 lifetime limitation. Over the past few years, many of you maxed out the credit with new windows, doors and HVAC systems.
Beginning in 2023, the Energy Efficient Residential property improvement credit has increased to 30% of qualifying expenditures with an annual (not lifetime) limit of $1,200. The credit for equals 30% of the sum of: