Electric Vehicle Tax Credit Changes for 2023

New Income and MSRP Limits Announced

Major Implications for Consumers

The Internal Revenue Service (IRS) has announced significant changes to the federal tax credit for electric vehicles (EVs) for 2023. These modifications will impact the eligibility of many taxpayers and the amount of credit they can claim.

Effective for vehicles delivered after December 31, 2022, the household adjusted gross income limit for the credit has been adjusted. Individuals with an income of $250,000 or less and joint filers with an income of $500,000 or less will now be eligible. Additionally, the maximum suggested retail price (MSRP) of qualifying trucks and SUVs has been capped at $80,000.

It is crucial to note that the EV credit is a tax credit, not a rebate. This means that taxpayers must have a federal tax liability of at least $7,500 to receive the full amount of the credit. If their tax liability is less than $7,500, they can only claim the amount of the credit that is equal to their tax liability.

Furthermore, the new battery sourcing requirement and MSRP cap will go into effect for vehicles delivered starting in 2023. This means that EVs must meet specific battery sourcing criteria and have an MSRP below the specified limits to qualify for the credit.

Taxpayers have up to three years to amend their tax return after submittal, providing flexibility in claiming the EV tax credit. However, it is essential to consider the potential cost-benefit analysis of claiming the credit versus purchasing an EV at the pre-price-hike pricing.