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Killeen Tax Center
HOW DO EV Tax Credits Work?
EV tax credits come from buying a vehicle with a battery propulsion system that can draw power from an external power source. The nonrefundable credits are available for battery-electric vehicles, plug-in hybrids (PHEV), and hydrogen fuel-cell vehicles (HFCV). The credits earned depend on a variety of factors and are used to decrease the taxes you owe in a given year. For instance, if you bought an EV eligible for a $7500 tax credit and your total federal taxes for the year came to $8500, then you would owe $1000 to the government.
The number of credits, or (NONREFUNDABLE) tax incentives, an EV can qualify for depends on the capacity of its battery pack. If a battery-electric or plug-in hybrid vehicle has a battery with a capacity of less than 7.0 kWh, then it does not qualify for any EV tax credits. Vehicles can qualify for up to $7500 in tax credits, and all HFCVs are eligible for the full amount.
Which Vehicles Qualify for EV Tax Credits?
The IRA introduces a number of changes to federal EV tax credit laws. One of the biggest is that the final assembly of qualifying vehicles now has to take place in North America. This part of the IRA went into effect when President Biden signed the law on August 16, 2022. The Department of Energy has published a list of around 30 models with final assembly in North America.
The majority of the IRA’s changes to the EV tax credit system take effect at the start of 2023. This includes price caps on qualifying vehicles (up to $55,000 for new cars and $80,000 for new trucks and SUVs) and an income ceiling that limits who can claim the credit.
Single and separate tax filers are capped at $150,000, those who file as a head of household are capped at $225,000, and joint filers and surviving spouses are capped at $300,000. These figures are halved for individuals looking to claim the $4000 tax credit for a used EV, PHEV, or HFCV.
Eligible used vehicles cannot cost more than $25,000 and have to be at least two years old to nab the EV tax credit. Additionally, an eligible vehicle can only qualify for the credit once in its service life. There's no getting around this, either, as those claiming the credit on an eligible vehicle has to include the VIN on their tax return.
SOUNDS GREAT but REMEMBER this is a NON-REFUNDABLE Tax Credit which means if you have a EV TAX CREDIT of $7500 and owe the IRS $500 in taxes the other $7000 is NOT REFUNDED to you!!!!! You owe no taxes (- $500) but you are out the additional $7000 CREDIT you may have thought you would receive. Need any other assistance or have questions or comments? Stop by or contact us at 254-699-5600 (JimE) or 699-4209 (TomR) and as usual all consults are FREE of charge.
EV tax credits come from buying a vehicle with a battery propulsion system that can draw power from an external power source. The nonrefundable credits are available for battery-electric vehicles, plug-in hybrids (PHEV), and hydrogen fuel-cell vehicles (HFCV). The credits earned depend on a variety of factors and are used to decrease the taxes you owe in a given year. For instance, if you bought an EV eligible for a $7500 tax credit and your total federal taxes for the year came to $8500, then you would owe $1000 to the government.
The number of credits, or (NONREFUNDABLE) tax incentives, an EV can qualify for depends on the capacity of its battery pack. If a battery-electric or plug-in hybrid vehicle has a battery with a capacity of less than 7.0 kWh, then it does not qualify for any EV tax credits. Vehicles can qualify for up to $7500 in tax credits, and all HFCVs are eligible for the full amount.
Which Vehicles Qualify for EV Tax Credits?
The IRA introduces a number of changes to federal EV tax credit laws. One of the biggest is that the final assembly of qualifying vehicles now has to take place in North America. This part of the IRA went into effect when President Biden signed the law on August 16, 2022. The Department of Energy has published a list of around 30 models with final assembly in North America.
The majority of the IRA’s changes to the EV tax credit system take effect at the start of 2023. This includes price caps on qualifying vehicles (up to $55,000 for new cars and $80,000 for new trucks and SUVs) and an income ceiling that limits who can claim the credit.
Single and separate tax filers are capped at $150,000, those who file as a head of household are capped at $225,000, and joint filers and surviving spouses are capped at $300,000. These figures are halved for individuals looking to claim the $4000 tax credit for a used EV, PHEV, or HFCV.
Eligible used vehicles cannot cost more than $25,000 and have to be at least two years old to nab the EV tax credit. Additionally, an eligible vehicle can only qualify for the credit once in its service life. There's no getting around this, either, as those claiming the credit on an eligible vehicle has to include the VIN on their tax return.
SOUNDS GREAT but REMEMBER this is a NON-REFUNDABLE Tax Credit which means if you have a EV TAX CREDIT of $7500 and owe the IRS $500 in taxes the other $7000 is NOT REFUNDED to you!!!!! You owe no taxes (- $500) but you are out the additional $7000 CREDIT you may have thought you would receive. Need any other assistance or have questions or comments? Stop by or contact us at 254-699-5600 (JimE) or 699-4209 (TomR) and as usual all consults are FREE of charge.
