September 16, 2022
For new vehicles placed in service after December 31, 2022, the qualified plug-in electric drive motor vehicle credit is replaced by the Clean Vehicle Credit.
For years before 2023, taxpayers may claim a tax credit with respect to a new qualified plug-in electric drive motor vehicle placed in service during the tax year. The credit is $2,500. However, if the vehicle draws propulsion energy from a battery with at least five kilowatt hours of capacity, the credit is increased by $417, plus an additional $417 for each kilowatt hour of battery capacity more than five kilowatt hours. This additional amount cannot exceed $5,000. Thus, the maximum credit amount per vehicle is $7,500. The basis of a qualified vehicle is reduced by the amount of any credit allowed.
Qualified Vehicle
To qualify for credit, the vehicle must meet the following requirements:
The original use of the vehicle must commence with the taxpayer.
The taxpayer must acquire the vehicle for use or lease, and not for resale.
The vehicle must be made by a manufacturer, as defined by reference to the regulations prescribed by the Environmental Protection Agency (EPA) for purposes of administering title II of the Clean Air Act.
The vehicle must have a gross vehicle weight rating (GVWR) of less than 14,000 pounds.
The vehicle must: (a) be treated as a motor vehicle for purposes of title II of the Clean Air Act; (b) be manufactured primarily for use on public streets, roads, and highways (not including a vehicle operated exclusively on a rail or rails) and (c) have at least four wheels. For example, a golf cart does not qualify for the credit since it is not manufactured primarily for use on public streets, roads, and highways.
The vehicle must be propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of not less than 4 kilowatts hours and is capable of being recharged from an external source of electricity. “Capacity” means the quantity of electricity that the battery can store, expressed in kilowatt hours, as measured from a 100% state of charge to a 0% state of charge.
The vehicle must be used predominantly in the United States.
Manufacturer’s Certificate.
A manufacturer may certify that a motor vehicle qualifies for the credit and the amount of the credit. A buyer may rely on a certification of eligibility and credit amount from the manufacturer or from a foreign manufacturer’s distributor. However, the taxpayer may not rely on the certification once the IRS announces that it has withdrawn an acknowledgment of certification.
Recapture
The Secretary of the Treasury is authorized to issue regulations providing for the recapture of the new qualified plug-in electric drive motor vehicle credit benefit if the property ceases to be eligible property.
Denial of Double Benefit
A new qualified plug-in electric drive motor vehicle that is used to claim the plug-in electric drive motor vehicle credit may not be used to claim an alternative motor vehicle credit. In addition, any other deduction or credit allowable for a vehicle for which a plug-in electric drive motor vehicle credit is also allowed is reduced by the amount of the credit allowed under Code Sec. 30D(f)(4) as determined without regard to any portion that is treated as part of the general business credit or as a personal credit.
Phaseout
The qualified plug-in electric drive motor vehicle credit is subject to a phaseout rule when 200,000 qualified vehicles have been sold for use in the United States by a manufacturer. For purposes of the phaseout, consolidated groups of corporations and foreign controlled corporations are considered one manufacturer. The phaseout period begins with the second calendar quarter following the calendar quarter that includes the date the 200,000th unit is sold. For the first two quarters of the phaseout period, the credit is cut to 50 % of the otherwise allowable full credit amount. The credit is cut to 25 % for the third and fourth quarters of the phaseout period. Thereafter, there is no credit allowed. These credit phase-outs are reflected in the IRS website list of qualified vehicles.
Please refer to the below IRS website for a list of qualified vehicles and the corresponding credit amounts.
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