Understanding EV Tax Credits for 2023

Brandon R. Amaral, CFP®, EA

Founder & Financial Planner, Amaral Financial Planning

For many EV (electric vehicle) shoppers, receiving a tax credit can significantly reduce your tax bill in April. While the Inflation Reduction Act of 2022 extended EV tax credits, it also added a few changes and restrictions that can be confusing to navigate.

Some of these include:

  • Manufacturing sales cap
  • Income limits for taxpayers
  • Purchase price limits
  • Final assembly requirements

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Here is a guide to understanding EV tax credits in 2023:

Manufacturing sales cap

In previous years, once a manufacturer had sold 200,000 EVs, the tax credit was no longer available to taxpayers. Beginning in 2023, the manufacturing caps have been removed and will last until 2032.

Income limits for taxpayers

One of the new restrictions added is an income eligibility cap. To qualify for the tax credit, your income must be below the following thresholds in either the year you take delivery of the EV or the year prior, whichever is lower.

For used EVs, the maximum credit is $4,000:

Tax-Filing StatusModified Adjusted Gross Income limit
Married Filing Jointly$150,000
Head of Household$112,500
Married Filing Separately$75,000

For new EVs, the maximum credit is $7,500:

Tax-Filing StatusModified Adjusted Gross Income limit
Married Filing Jointly$300,000
Head of Household$225,000
Married Filing Separately$150,000

Purchase price limits

Another restriction added is based on the purchase price of the EV:

  • For used EVs, the maximum purchase price is $25,000.
  • For new sedans and passenger cars, the maximum purchase price is $55,000.
  • For vans, trucks, and SUVs, the maximum purchase price is $80,000.

The calculation for the purchase price does NOT include any sales tax or fees added by the dealer.

Final assembly requirements

The final restriction added is where the final assembly of the EV took place. In order to qualify for the tax credit, the final assembly had to take place in North America.

You can search your vehicle’s VIN here to see where its final assembly was.

Is there a lease loophole?

Some news sources have reported that you can bypass certain restrictions, such as the final assembly requirement and purchase price limit, if you opt to lease rather than purchase your EV.

What many of these sources are failing to highlight is the fact that only commercial vehicles are eligible for the tax credit when leasing. This means that only EVs that are leased and used by a business will be eligible for the tax credit.

Understanding the nuances of the Inflation Reduction Act and guidance from the IRS can be confusing. If you would like to work with a financial planner to walk you through your options, I would love to help you!

To learn more about becoming a client, schedule a complimentary meeting now!

Disclaimer: This blog is for informational purposes only, and should not be considered advice or recommendations. All opinions expressed herein are solely those of Amaral Financial Planning, LLC, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made to another parties’ informational accuracy or completeness. You should consult your financial advisor, tax professional or legal counsel prior to implementation.