The new Inflation Reduction Act has been passed recently. This is a move aimed at giving taxpayers up to $1,000 in a tax credit while a previous federal tax break for EV chargers got a new life.
The government has extended the section 30C tax credit for ten more years. This section is referred to as the Alternative Fuel Vehicle Refueling Property Credit. In this article, we are going to discuss what happens with a tax credit for a new electric vehicle purchase and how much of a tax credit you may get.
How Much of a Tax Credit Can I Get for My EV Purchase?
Congress passed the new energy law in August 2022, which changed the tax incentive for people who electrified their vehicles and homes. In this law, it has become more challenging to qualify for a $7,500 tax credit for a new EV purchase has become more challenging.
This news was a total surprise for new EV buyers. The new law offers more restrictions but also adds flexibility for the tax year 2023 through 2032.
One of the new rules applies to credit, which is limited based on the place of manufacture and battery components. Besides, manufacturer caps are ended by this law.
However, the new law has added income limitations and vehicle price caps. It really almost doesn’t matter what credit score is, but you can use reliable free credit score checkers to understand what to expect.
Keep in mind that the EV tax credits aren’t refundable. What does it mean? It means that filters won’t be able to return more than they owe in taxes. Furthermore, they won’t carry forward an excess credit to the next tax year. You can find a list of “Manufacturers and Models for New Qualified Clean Vehicles Purchased in 2023” on the IRS website.
Federal Tax Credit for Home EV Charger
Taxpayers can qualify for a credit of 30 percent during the 2023 tax season. This is the credit for the installation and hardware expenses for EV chargers installed in 2022. This tax credit can be used once for up to $1,000.
You may need to pay between $20 and $1,000 for a residential EV charger. The price depends on the brand and the type. It may cost you from $300 to $1,000 to hire an electrician to install an EV charger.
Sometimes, consumers even have to update the electrical panel as the new charger can’t be accommodated to the old one. It may increase your installation expenses as well. More than that, you may have to receive a permit for charger installation.
This cost may also add up to the overall installation expenses. How much can you get as a tax credit for EV charger installation? Save the receipts for taxes you file and check IRS Form 8911 for the details.
According to Mobility Market Outlook issued by Statista, the global sales of electric vehicles are expected to hit $384 billion in 2022. We have seen a growth in the popularity of plug-in hybrid EVs and battery EVs recently.
It is estimated that these sales will reach a shared market volume of $869 billion in 4 years. The growth of the EV market has been noticeable despite the global pandemic.
More Types of EV Chargers May Qualify for the Tax Credit
The previous credit didn’t include bidirectional charging equipment, while the new law covers these expenses as well. Taxpayers may claim a tax credit for EV chargers that were manufactured for two- and three-wheeled vehicles.
For instance, motorcycles can qualify for that. Your vehicle is charged using the electricity from your home for bidirectional EV charges. Besides, these charges may send energy to the house or the grid. For instance, your home can be powered for about two or three days by the Quasar 2, which costs about $4,000.
The data published at Fueleconomy.gov shows that consumers can get a tax credit of up to $7,500 for new vehicles bought in or after 2023. Apart from that, you may obtain a credit of up to $4,000 for used vehicles bought from a dealer for $25,000 or less. This sum equals 30 percent of the purchased price, while the maximum credit is $4,000.
Credit for New EVs Purchased in 2023 or After
Are you planning to buy a new EV or an FCV (fuel cell vehicle) in 2023 or after? Have you already made this purchase? Then you can be eligible for a tax credit. Who can qualify for it?
A taxpayer may qualify for a tax credit of up to $7,500 according to Internal Revenue Code Section 30D. This rule applies to new FCVs and EVs. The rules for this tax credit were changed by the Inflation Reduction Act of 2022.
The tax credit is available to people and their ventures. In order to qualify, you need to:
- Use the vehicle primarily in the USA
- Purchase it for your own use.
Apart from that, the modified adjusted gross income (AGI) of the consumer can’t exceed:
- $225,000 for the head of the household
- $300,000 for a married couple filing jointly
- $150,000 for all other filers
The modified AGI may be used from the year before the delivery of the EV or from the year the delivery was taken. A person may claim the tax credit if their modified AGI is lower that the threshold in one of the two years. Keep in mind that this credit isn’t refundable.
Qualified Vehicles
To qualify for this tax credit, a vehicle needs to:
- Have a gross vehicle weight of up to 14,000 pounds
- Have a battery capacity of a minimum of 7 kilowatt hours
- Undergo final assembly in North America
- Be manufactured by a qualified company.
Besides, there are additional rules:
- An individual has to purchase the new vehicle
- The seller reports the name and taxpayer identification number to the IRS.
The Bottom Line
Summing up, there are tax benefits to installing an EV charger. The new law that passed in August 2022 revived a credit for charging systems. You may qualify for $1,000 or 30 percent of the expenses associated with purchasing and installing an EV charger, whichever is less. Besides, you may get a tax credit of 30% of the sales price of a used EV priced up to $25,000.
About the Author/s
The New Jersey Digest is a new jersey magazine that has chronicled daily life in the Garden State for over 10 years.
