Is the New EV Tax Credit Better or Worse?

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Chapters (Time Stamps):
0:00 - 6:29 New EV vehicle tax credits
6:30 Used EV vehicle tax credits

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Manufacturer limitation eliminated . The limitation on the number of vehicles eligible for the credit has been eliminated. ( Code Sec. 30D(e) , as amended by Act Sec. 13401(d))
The elimination of the manufacturer limitation applies to vehicles sold after December 31, 2022. (Act Sec. 13401(k)(5))
Calculation . The Act changes how the clean vehicle credit is calculated. Taxpayers get a $3,750 credit for meeting the critical minerals requirement and a $3,750 credit for meeting the battery component requirement (see below). ( Code Sec. 30D(b) , as amended by Act Sec. 13401(a))


Final assembly requirement . To qualify for the credit, the Act also requires that final assembly of the vehicle occurs in North America (the "final assembly requirement"). "Final assembly" means the process by which a manufacturer produces a new clean vehicle at, or through use of, a plant, factory, or other place from which the vehicle is delivered to a dealer or importer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether or not the component parts are permanently installed in or on the vehicle. ( Code Sec. 30D(d)(1)(G) and (d)(5), as amended by Act Sec. 13401(b))

Transfer of credit. The taxpayer who acquires a new clean vehicle can elect, on or before the purchase date, to transfer the clean vehicle credit to the dealer who sold the vehicle in return for full payment of the credit amount. Making the election cannot limit the use or value of any other dealer or manufacturer incentive to buy the vehicle, nor can the availability or use of the incentive limit the ability of the taxpayer to make the election. ( Code Sec. 30D(g) , as amended by Act Sec. 13401(g))

Under the Inflation Adjustment Act of 2022, a qualified buyer who acquires and places in service a previously-owned clean vehicle after 2022 is allowed an income tax credit equal to the lesser of $4,000 or 30% of the vehicle's sale price. ( Code Sec. 25E(a) , as added by Act Sec. 13402(a)) No credit is allowed if the lesser of the taxpayer's modified adjusted gross income for the year of purchase or the preceding year exceeds $150,000 for a joint return or surviving spouse, $112,500 for a head of household, or $75,000 for others. ( Code Sec. 25E(b) , as added by Act Sec. 13402(a))

Qualified sale. A qualified sale is a sale of a motor vehicle by a dealer for a price of $25,000 or less, which is the first transfer since the Act's enactment to a qualified buyer other than the original buyer of the vehicle. ( Code Sec. 25E(c)(2) , as added by Act Sec. 13402(a))

Qualified buyer. A qualified buyer is an individual who purchases the vehicle for use and not for resale, who is not a tax dependent of another taxpayer, and has not been allowed a credit for a previously-owned clean vehicle during the three year period ending on the sale date. ( Code Sec. 25E(c)(3) , as added by Act Sec. 13402(a))

• The seller of a new clean vehicle is required to furnish a report to the buyer and the IRS (the "report requirement") containing:
• the name and taxpayer identification number of the buyer;
• the vehicle identification number (VIN) of the vehicle, unless, in accordance with any applicable rules promulgated by the U.S. Department of Transportation, the vehicle is not assigned a VIN;
• the battery capacity of the vehicle;
• verification that the original use of the vehicle commences with the taxpayer; and
• the maximum Clean Vehicle credit allowable to the buyer with respect to the vehicle. (Code Sec. 30D(d)(1)(H), as amended by Act Sec. 13401(c)(1)(B)(v))