Published May 10, 2023
As the world begins its transition into cleaner and more sustainable modes of transportation, electric vehicles (EVs) are becoming increasingly more popular by the minute. In response to this, governments have started offering incentives such as tax credits to encourage consumers to go out and buy EVs. Unfortunately, not many people are aware of this. Still, the US federal government offers a tax credit for purchasing qualifying EVs, and if you own an electric car, there’s a good chance you may be eligible. So, let’s take a closer look and break down the EV tax credit for 2023.
What is the EV Tax Credit?
The EV tax credit is a federal tax credit offered to individuals who purchase qualifying electric vehicles. The purpose of the credit is to incentivize consumers to buy EVs as they are easier on the environment and drastically reduce our dependence on fossil fuels. How much is the credit if you decide to make the jump to electric? Well, that depends on a few things, such as the vehicle’s battery capacity and the company that manufactured it.
How Much is the EV Tax Credit for 2023?
Even though the amount of credit you can receive depends on a few factors, as of 2021, the maximum EV tax credit amount is set at $7,500. However, the credit amount is gradually phased out for each manufacturer once they have sold 200,000 qualifying EVs. After reaching 200,000 sales, the credit will drop by 50% every six months until it eventually reaches zero. Automotive powerhouses like Tesla and General Motors have already reached the threshold, and their vehicles no longer qualify for the credit.
To qualify, you must buy the vehicle:
- For use primarily in the US
- For your own use, not for resale
To qualify, the vehicle must:
- Be manufactured by a company that hasn’t sold more than 200,000 EVs in the US
- Have a gross vehicle weight of 14,000 pounds or less
- Have an external charging source
It is important to note that the tax credit amount is subject to change as the government may change the tax laws.
How to Claim the EV Tax Credit?
To claim the EV tax credit, you must file Form 8936 with your federal tax return. This form will ask you to provide general information about the vehicle, including:
- Year manufactured
- Make
- Model
- Battery capacity
Additionally, you must have purchased the vehicle brand new, and it must solely be used for personal purposes. Vehicles used for business do not qualify.
What Did We Learn?
To make this information a little easier to digest, here’s a quick rundown of everything covered in this article.
- The EV tax credit is a federal tax credit that incentivizes individuals to buy qualifying electric vehicles.
- The maximum credit amount is $7,500, but it is subject to phase-out for each manufacturer once they have sold 200,000 qualifying EVs.
- To claim the credit, you must file Form 8936 with your federal tax return.
As the world continues to embrace sustainable energy, EVs are poised to become increasingly more popular. With the EV tax credit in place, individuals can not only reduce their carbon footprint, but they may also qualify to receive a tax credit. For more information on tax credits and incentives, contact JTC CPAs today.
Sources:
Internal Revenue Service. (2021). Plug-In Electric Drive Vehicle Credit (IRC 30D). https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d
Contributor: Tony Bostian
