In the business of selling cars? Looking at buying a clean vehicle? Clean Vehicle Credits can help you maximize your refund at tax time.
The Inflation Reduction Act of 2022 (IRA) makes several changes to the tax credit for qualified plug-in electric drive motor vehicles, including adding fuel cell vehicles to the tax credit. The IRA also added a new credit for previously owned clean vehicles. Beginning on January 1, 2024, the credits may be applied at the point of sale for the customer to reduce the cost of the purchase by the amount of the credit. Eligible taxpayers do not need to wait until filing season!
Clean vehicle credits are nonrefundable credits meant to lower the cost of qualifying plug-in electric or other “clean” vehicles. In tax years 2023-2032, the credit is up to $4,000 for previously owned clean vehicles and up to $7,500 for new clean vehicles. There are certain requirements for qualified vehicles, including the vehicle’s weight, manufacturer, assembly location, suggested retail price, mineral and battery component requirements, etc. See: Credits for new clean vehicles purchased in 2023 or after | Internal Revenue Service (irs.gov) for more information. In addition, eligible taxpayers need to meet certain ownership, use, and modified adjusted gross income (AGI) requirements. These credits are available to any qualified vehicles placed into service not later than December 31, 2032.
Dealers and Sellers of Clean Vehicles
On October 23, 2023, the IRS launched its Energy Credits Online tool encouraging qualified dealerships and sellers to register using an online portal.
As stated above, qualified customers may be eligible for up to $7,500 credit on new and $4,000 on used qualified clean vehicles. Timely registration will allow an immediate financial benefit to the vehicle buyer at the time of sale, permitting the seller to apply the credit to reduce the cost of the purchase by the amount of the credit which may help increase sales by registered dealers.
The IRS will promptly issue advance payments via direct deposit to the registered and qualified dealership or seller. The IRS anticipates deposits will typically occur within 48 – 72 hours of a successfully submitted time of sale report and advance payment request by the dealer. Registered dealers can begin receiving transferred new or used clean vehicle tax credits from eligible buyers on January 1, 2024.
Eligible dealers and sellers must use the Online Energy Credit Portal to register with the IRS. Licensed dealers can also register to receive advance payments to offset the amount of a tax credit that was applied toward a buyer’s purchase price.
How do I register my dealership?
- Register for an ID.me account.
- Provide Employer ID Number (EIN).
- Provide business name and mailing address.
- Add dealership’s license number, bank routing and account numbers.
The registration process for dealers and sellers is quick and easy! Be sure to verify that your account indicates “Success” at the conclusion of registration.
For step by step guidance refer to the IRS’s Video, How Dealers and Sellers Register for Energy Credits Online.
Buyers of Clean Vehicles
Individuals and business can learn more about credit eligibility and vehicle qualifications at irs.gov.
Who qualifies for the new clean vehicle credit:
- Vehicle MUST be for own use, cannot resell.
- Primarily used in the United States.
- AGI $300,000 or less for married filing jointly.
- AGI $225,000 or less for head of households.
- AGI $150,000 or less for all other filers.
Who qualifies for a used clean vehicle credit:
- Vehicle MUST be for own use, cannot resell.
- NOT the original owner.
- NOT claimed as a dependent.
- Have NOT previously claimed a clean vehicle credit (within last 3 years).
- AGI $150,000 or less for married filing jointly.
- AGI $112,500 or less for head of household.
- AGI $75,000 or less for all other filers.
If you meet these qualifications, are in the market, or have purchased a new or used clean vehicle it’s imperative that you verify your New Clean Vehicle Eligibility or Used Clean Vehicle Eligibility.
Buyer Be Aware:
If your modified AGI exceeds the limitations for the taxable year, you will be required to repay the amount received for transferring the tax credit as an addition to tax for the year the vehicle was placed in service.
For more updates from the Taxpayer Advocate Service (TAS) on clean vehicle credits and other helpful tax tips, monitor the TAS news and information center to read the latest tax tips, blogs, alerts, and more.