What is the income limit for EV tax credit 2023?

If you are thinking of buying an electric vehicle (EV) in 2023, you may be wondering if you can benefit from the federal EV tax credit. The EV tax credit is a non-refundable tax credit that reduces your income tax liability by a certain amount, depending on the type and cost of the EV you purchase. The tax credit is designed to encourage more people to switch to cleaner and more efficient vehicles and reduce greenhouse gas emissions.

However, not all EVs qualify for the tax credit, and not all taxpayers are eligible to claim it. There are some income limits and other restrictions that you need to be aware of before you buy an EV in 2023. In this blog post, we will explain what the income limit for EV tax credit 2023 is, how it works, and what changes are expected in the future.

What is the income limit for EV tax credit 2023?

The income limit for EV tax credit 2023 is based on your adjusted gross income (AGI), which is your total income minus certain deductions. The income limit varies depending on your filing status and whether you buy a new or used EV.

For new EVs, the income limit for EV tax credit 2023 is:

- $150,000 for single taxpayers

- $300,000 for married taxpayers filing jointly

- $225,000 for head of household taxpayers

If your AGI is above these thresholds, you cannot claim the EV tax credit for new vehicles .

For used EVs, the income limit for EV tax credit 2023 is:

- $75,000 for single taxpayers

- $150,000 for married taxpayers filing jointly

- $112,500 for head of household taxpayers

If your AGI is above these thresholds, you cannot claim the EV tax credit for used vehicles .

How does the EV tax credit work for 2023?

The EV tax credit works differently for new and used vehicles. For new vehicles, the maximum amount of the credit is $7,500, but it may be lower depending on the battery capacity and cost of the vehicle. The credit is also phased out for certain manufacturers that have sold more than 200,000 qualifying vehicles in the U.S., such as Tesla and General Motors.

For used vehicles, the maximum amount of the credit is $4,000 or 30% of the purchase price, whichever is lower. The vehicle must be at least two years old and have a battery capacity of at least 7 kWh. The vehicle must also not have been used or acquired for any purpose before you bought it .

The EV tax credit is non-refundable, which means it can only reduce your tax liability to zero. If your tax liability is less than the amount of the credit, you cannot get a refund or carry over the unused portion to future years. You can only claim one credit per vehicle, and you must own and use the vehicle primarily in the U.S. You cannot claim the credit if you lease the vehicle or use it for business purposes.

What changes are expected for the EV tax credit?

The EV tax credit is subject to change depending on future legislation and regulations. Some of the changes that are expected or proposed for the EV tax credit are:

- Starting in 2024, the income limits for new and used vehicles will be indexed to inflation.

- Starting in 2024, the phase-out for certain manufacturers will be eliminated, and all new vehicles will be eligible for the full credit amount.

- Starting in 2024, the maximum credit amount for new vehicles will be increased to $10,000 for vehicles that are made in America by union workers.

- Starting in 2024, an additional $2,500 credit will be available for new vehicles that are made by small manufacturers with less than 10% market share.

- Starting in 2024, an additional $2,500 credit will be available for new vehicles that have a battery capacity of at least 40 kWh.

- Starting in 2024, an additional $2,500 credit will be available for new vehicles that have a range of at least 250 miles on a single charge.

- Starting in 2024, an additional $2,500 credit will be available for new vehicles that have a fast-charging capability of at least 150 kW.

- Starting in 2024, an additional $2,500 credit will be available for new vehicles that have a bi-directional charging capability, which allows them to send electricity back to the grid or other devices.

- Starting in 2024, the credit will be refundable, which means you can get a refund if your tax liability is less than the amount of the credit.

- Starting in 2024, the credit will be assignable, which means you can transfer it to the dealer or a third party at the point of sale and get an instant discount on the purchase price.

These changes are part of the Build Back Better Act, which is a proposed legislation that aims to invest in infrastructure, climate, and social programs. The bill has passed the House of Representatives, but it still needs to be approved by the Senate and signed by the President before it becomes law. Therefore, these changes are not guaranteed and may be subject to further revisions or delays.

Conclusion

The EV tax credit is a valuable incentive for buying an electric vehicle in 2023, but it has some income limits and other restrictions that you need to consider. Depending on your filing status and whether you buy a new or used vehicle, you may or may not be eligible for the credit. You also need to be aware of the potential changes that are expected or proposed for the EV tax credit in the future, as they may affect your decision and savings. If you have any questions or doubts about the EV tax credit, you should consult a tax professional or visit the IRS website for more information.