New rules may make it easier to knock up to $7,500 off the price off an EV—here's how to qualify
Qualifying for the $7,500 federal tax credit for electric vehicles will be easier, based on newly proposed rules effective as of 2024.
Hollif
The U.S. Department of the Treasury is making it easier to claim an electric vehicle tax credit worth up to $7,500 starting in 2024, based on new guidance announced last week.
One big change is that you'll qualify for the credit upfront when you buy a car at a dealership, rather than claiming it as part of your tax return — that means you won't have to potentially wait months to get your money back.
The other significant change is that all eligible buyers get the full tax break, even if they don't owe federal taxes. Currently, tax filers receive only as much of the credit as they owe in taxes.
The Treasury Department and the IRS are considering public feedback before they finalize the rules later this year. The changes would be effective as of Jan. 1, 2024, for both electric vehicles and fuel-cell vehicles.
How to qualify for the credit if you buy a new EV
To qualify for the credit, you must buy the car at a dealership while satisfying numerous requirements, including caps on income, how the vehicle will be used and specifications related to how the vehicle was made.
In some cases, you might be eligible for a partial credit based on the type of car you buy and where it's made.
The IRS' website has a full list of requirements for new EVs and FCVs that you should read carefully before buying a vehicle. Here's a look at a few of the major requirements:
Total annual adjusted gross income can't exceed $300,000 for married couples, $225,000 for heads of household or $150,000 for single tax filers.The vehicle must be for your own use and used primarily in the U.S.The vehicle retail price cannot exceed $80,000 for vans, sport utility vehicles and pickup trucks, or $55,000 for all other vehicles.The vehicle must meet various standards for weight, battery capacity and final assembly location, as well as where battery components or critical minerals are sourced.The U.S. Department of Energy also has a helpful tool that can show you if your car qualifies.
How to qualify for the credit if you buy a used EV
You can also qualify for a tax credit if you buy a used EV or FCV, for 30% of the sale price up to a maximum of $4,000.
The IRS' website has a full list of requirements. Here's a look at a few of the major ones:
Annual adjusted gross income can't exceed $150,000 for married couples, $125,000 for heads of household or $75,000 for single tax filers.You can't be a previous owner of the vehicle or have claimed the credit three years prior to the purchase date. Additionally, you can't be claimed as a dependent on another person's tax return.The vehicle must be for your own use and used primarily in the U.S.The vehicle must have a sale price of $25,000 or less and be a model year that's at least two years earlier than the year in which you bought it. That means a car purchased in 2023 would have to be a 2021 model or older.The vehicle must meet various requirements, including weight.The U.S. Department of Energy has a helpful tool for used vehicles as well.
DON'T MISS: Want to be smarter and more successful with your money, work & life? Sign up for our new newsletter!
Want to earn more and land your dream job? Join the free CNBC Make It: Your Money virtual event on Oct. 17 at 1 p.m. ET to learn how to level up your interview and negotiating skills, build your ideal career, boost your income and grow your wealth. Register for free today.
