The Internal Revenue Service reminded consumers considering an automobile purchase to be sure to understand several recent changes to the new Clean Vehicle Credit for qualified plug-in electric drive vehicles, including qualified manufacturers and tax rules.
The Inflation Reduction Act of 2022 (IRA) made several changes to the new Clean Vehicle Credit for qualified plug-in electric drive motor vehicles, including adding fuel cell vehicles. The IRA also added a new credit for previously owned and commercial clean vehicles.
Before taxpayers purchase a clean vehicle they should be sure that the vehicle was made by a qualified manufacturer. Taxpayers must also meet other requirements such as the modified adjusted gross income limits.
To be a qualified manufacturer, the manufacturer must enter into an approved agreement with the Internal Revenue Service and supply the IRS with valid vehicle identification numbers (VINs) that can later be matched at the time of filing to the VIN reported on the return.
When purchasing a new or used clean vehicle, purchasers should check if the make and model are eligible. In addition, for a new or used clean vehicle to be eligible for a Clean Vehicle Credit, the seller must provide the buyer with a seller report verifying that the vehicle purchased will qualify for the credit, which will include the make, model, and VIN.
Also, the clean vehicles tax credits are non-refundable, meaning that they can increase a refund or reduce the amount of tax owed, they cannot be used to create a tax refund.
The amount of tax owed will determine if the full amount or only a portion of the credit can be claimed.