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Energy Credits, Part 2

Energy Credits, Part 2

December 13, 2023

The Inflation Reduction Act of 2022 included numerous individual energy-efficient credits to motivate taxpayers to purchase energy-efficient home improvements and vehicles.

 

My previous post discussed the qualified energy-efficient home improvement credit; part two will discuss the changes to the vehicle credits included in the Inflation Reduction Act of 2022.

 

The Clean Energy Credit for New Vehicles provides a maximum credit for qualifying vehicles up to $7,500; this credit is non-refundable and cannot be carried forward to future years.

 

A qualifying vehicle must be purchased new, have a battery capacity of at least seven kilowatt-hours, have a gross weight under 14,000 pounds, be manufactured by a qualifying company, have a final assembly in North America, and meet the mineral and battery component tests, assuming they were placed into service after April 18, 2023. Also, vans, trucks, and sports utility vehicles with a manufacturer-suggested retail price (MSRP) over $80,000 do not qualify for the credit. Dealerships should provide information on qualifying vehicles. Similarly, other qualifying vehicles, including passenger cars with an MSRP over $55,000, do not qualify.

 

There is a modified adjusted gross income limitation: married filing jointly $300,000, head-of-household $225,000, and $150,000 for all others. You can use your MAGI for either the year of delivery of your qualifying vehicle or the prior year, whichever is less.

 

The Clean Energy Credit for Used Vehicles provides a credit of 30% of the sales price with a maximum non-refundable credit of up to $4,000. This credit applies to vehicles purchased after January 1, 2023, from a licensed dealer who will furnish the information to the IRS. The sale price must be less than $25,000, have a vehicle model year at least two years earlier than the purchase year, weigh less than 14,000 pounds, and be used in the United States. The VIN number must be reported on your tax return.

 

The MAGI limits for the clean energy credit for used vehicles are $150,000 for married filing jointly, $112,500 for head of household, and $75,000 for all other taxpayers. The MAGI can be applied to the year the vehicle was purchased or the preceding year.

 

An additional requirement for the used vehicle credit is that you can only claim the credit once every three years. You are ineligible for the credit if you purchase the vehicle from your spouse or dependent. Any purchases made outside of dealerships are not qualified for credit.

Source: Inflation Reduction Act of 2022