Starting 2023, the Internal Revenue Service (IRS) offers a tax credit for qualified used electric vehicles (EV) or fuel cell vehicles (FCV). The credit is available to individuals for vehicles purchased between 2023 and 2032. The credit is worth 30% of the sale price, up to a maximum credit of $4,000.
- Who can claim the tax credit?
- What makes a vehicle qualify?
- Claiming the tax credit
- List of qualified used vehicles
Who can claim the used clean vehicle tax credit?
To qualify for the credit, the vehicle can’t be bought for resale, and you can’t be the original owner, or be claimed as a dependent on someone else’s tax return. In addition, you can’t have claimed another used clean vehicle credit in the 3 years prior to the purchase date.
The vehicle must be purchased from a licensed dealer. The credit is nonrefundable, meaning you can’t get back more on the credit than you owe in taxes, and any excess credit can’t be applied to future tax years.
Your modified adjusted gross income (AGI) must not exceed certain thresholds based on your filing status. For married couples filing jointly the AGI must not exceed $150,000. For heads of household, the AGI must not exceed $112,500. For all other filers, the AGI must not exceed $75,000.
The modified adjusted gross income (AGI) used to determine eligibility for the credit can be from the year in which the vehicle was purchased or the year prior, whichever is lower.
What makes a vehicle qualify for the used clean vehicle tax credit?
The vehicle must also meet certain requirements to qualify for the credit. To qualify for the credit, the vehicle must meet all of the following requirements:
- Have a sale price of $25,000 or less
- Have a model year at least 2 years earlier than the calendar year when you buy it. For example, a vehicle purchased in 2023 would need a model year of 2021 or older.
- Not have already been transferred after August 16, 2022, to a qualified buyer.
- Have a gross vehicle weight rating of less than 14,000 pounds
- Be an eligible FCV or plug-in EV with a battery capacity of at least 7 kilowatt hours
- Be for use primarily in the United States
Claiming the used clean vehicle tax credit
In order claim the credit, the sale must also meet certain requirements. You must buy the vehicle from a licensed dealer, the dealer must report certain information to you and to the IRS at the time of sale. This information includes the dealer’s name and taxpayer identification number, your name and taxpayer identification number, the sale date and sale price, the maximum credit allowable under Internal Revenue Code Section 25E, and the vehicle identification number (VIN), unless the vehicle is not assigned one.
To claim the credit, you must file Form 8936, “Qualified Plug-in Electric Drive Motor Vehicle Credit,” with your tax return and provide the vehicle’s VIN. The seller is also required to report your name and taxpayer identification number to the IRS for you to be eligible to claim the credit.
List of qualified vehicles for used clean vehicle tax credit
It is also worth noting that credits are also available for new clean vehicles, qualified commercial clean vehicles, and new plug-in EVs purchased before 2023. More information on these credits can be found on the IRS website.