Pre 2023 Plug-In Vehicle Credits
4-Wheeled Plug-In Electric Vehicle Credit (Code Sec 30d) – Prior to 2022
Those rules provide the following:
The Credit Amount
The per-vehicle credit will be the sum of the following: (Code Sec. 30D(b)(1))
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$2,500; plus
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For a vehicle which draws propulsion energy from a battery with not less than 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of capacity in excess of 5 kilowatt hours, but not in excess of $5,000. For this purpose, battery capacity, with respect to any battery is the quantity of electricity that the battery can store, expressed in kilowatt hours, as measured from a 100% state of charge to a zero percent state of charge. Thus, the maximum credit is $7,500.
Important
Vehicles purchased after August 16, 2022, must meet the following requirements which will eliminate some vehicles that previously qualified. Read the following carefully.
Qualified Vehicles Limited
After August 16, 2022, to qualify for the credit, even under the old rules, vehicles must meet the following requirements, which will limit manufacturers and vehicles that qualify for the credit. At publication date it is unclear what vehicles will qualify under these requirements until the IRS issues additional guidance. An Internet search shows sites with unofficial lists of qualifying vehicles.
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Final Assembly Requirement - Effective for vehicles sold after August 16, 2022, IR Act 2022 requires that final assembly of the vehicle occurs in North America. "Final assembly" means the process by which a manufacturer produces a new clean vehicle at, or through use of, a plant, factory, or other place from which the vehicle is delivered to a dealer or importer with all component parts necessary for the mechanical operation of the vehicle included with the vehicle, whether the component parts are permanently installed in or on the vehicle. (Sec 30D(d)(1)(G) & (d)(5), Act Sec. 13401(b))
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Critical Mineral and Battery Component Requirements - As part of IR Act 2022, the IRS is required to issue regulations or other guidance necessary related to the critical mineral and battery component requirements no later than December 31, 2022. (Sec 30D(e)(3), Act Sec 13401(e)(1)) The critical mineral and battery component requirements apply to vehicles placed in service after the date on which this proposed guidance is issued. (Act Sec. 13401(k)(3))
Purchasing Multiple Electric Vehicles
Sec 30D is a per vehicle credit and there is no individual taxpayer limit. See citation below.
Sec 30D new qualified plug-in electric drive motor vehicles – (a) There shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the sum of the credit amounts determined under subsection (b) with respect to each new qualified plug-in electric drive motor vehicle placed in service by the taxpayer during the taxable year.
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Thus, if a taxpayer purchases multiple electric vehicles the taxpayer is entitled to the credit for all of the vehicles, subject to the non-refundable provisions for the personal credit and subject to the general business credit provisions for the business portion of the credit.
Credit Phase-Out
The credit phases out beginning in the second calendar quarter following that in which a manufacturer sells its 200,000th plug-in electric drive motor vehicle for use in the U.S. The applicable percentage phase-out is:
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50% for the first two calendar quarters of the phaseout period
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25% for the third and fourth calendar quarters of the phaseout period, and
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0% for each later calendar quarter.
Go to the IRS website to determine if the credit is phasing out for a particular vehicle: http://www.irs.gov/Businesses/IRC-30D-Plug-In-Electric-Drive-Motor-Vehicle-Credit-Quarterly-Sales
Qualifying Vehicles
To determine if a particular vehicle qualifies for the credit and the amount of the credit visit the following IRS website: http://www.irs.gov/Businesses/Qualified-Vehicles-Acquired-after-12-31-2009
Credit Sunset
There is no specific sunset date for this credit other than the per manufacturer quantity phase-out. But see “Clean Vehicle Credit” for the rules for post-8/15/2022 purchases.
Motor Vehicle Definition
A “motor vehicle” is any vehicle manufactured primarily for use on public streets, roads and highways (not including a vehicle operated exclusively on a rail or rails) and that has at least four wheels.
Qualified Plug-In Electric Drive Motor Vehicle
A qualified plug-in electric drive motor vehicle is a “motor vehicle” that satisfies the requirements listed below:
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The original use of the vehicle begins with the taxpayer.
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The vehicle is acquired for use or lease by the taxpayer and not for resale. “Acquired” is defined as the date on which title to the vehicle passes under state law (Notice 2009-89).
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The vehicle is made by a “manufacturer” (defined below).
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The vehicle is treated as a motor vehicle for purposes of title II of the Clean Air Act.
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The vehicle has a gross vehicle weight rating of less than 14,000 pounds.
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The vehicle is propelled to a significant extent by an electric motor that draws electricity from a battery that has a capacity of at least 5 kilowatt hours and is capable of being recharged from an external source of electricity.
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The vehicle is in compliance with the provisions of the Clean Air Act (or state law in certain cases) applicable for the make and model year of the vehicle and motor vehicle safety provisions of sections 30101 – 30169 of title 49, US Code.
Certification
A taxpayer may rely on a manufacturer's certification concerning the vehicle and the amount of the credit allowable for the vehicle (including in cases in which the certification is received after the purchase of the vehicle) provided the taxpayer meets the other requirements for the credit. (IRS Notice 2009-58). The IRS web site includes a list of certified vehicles and the amount of the available credit – search “Plug-in Electric Vehicle Credit (IRC 30D)” on the IRS web site.
Allocation Between Business and Personal Use
The credit is allocated between a personal credit (personal use) and general business credit (business use).
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Personal Credit – The personal portion of the credit is a non-refundable personal credit that will off-set the AMT., Thus, any excess not used in the year of purchase is lost.
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Business Credit – The business use portion of the credit becomes part of the general business credit (Form 3800) with its normal carry back and carry forward provisions.
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Basis – Both the personal and depreciable basis of the vehicle must be reduced dollar for dollar by the amount of the credit claimed for the purchase of the vehicle. No credit is allowed for any portion of the vehicle expensed under Sec 179.
Foreign Use Property
The credit is not allowed to foreign use property.
Elect Out
The credit won't be allowed for a vehicle if the taxpayer elects to not have the credit apply to that vehicle (an election out).
Manufacturer
The term manufacturer for purposes of these credits has the same meaning as in regulations prescribed by the Administrator of the Environmental Protection Agency for purposes of administering title II of the Clean Air Act (42 U.S.C. 7521 et seq).
Who Gets the Credit
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Purchased Vehicle - The purchaser of the vehicle that originally places the vehicle in service claims the credit!
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Leased Vehicle - If the EV is leased, the tax credit goes to the manufacturer or dealer that's offering the lease, not the one leasing the vehicle. The carmaker or dealer will likely factor the credit into the cost of the lease to lower the monthly payment, but that isn't mandatory.
Off-Road Vehicles & Golf Carts
Vehicles manufactured primarily for off-road use, such as for use on a golf course, do not qualify for the credit.
Business Portion of Credit
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Is part of the general business credit.
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Recapture is required if the property:
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Ceases to qualify for the credit before the end of its recovery period;
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Is no longer used 50% or more in a trade or business
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