The eligibility requirements for the federal tax credit on new electric vehicles (EVs) in the U.S. are detailed and have multiple components. Here is a comprehensive breakdown based on the latest rules effective for vehicles purchased from 2023 onward:
Basic Eligibility Criteria
- Vehicle type: Must be a new plug-in electric vehicle (EV) or fuel cell electric vehicle (FCV).
- Purchase purpose: The vehicle must be purchased for your own use, not for resale.
- Primary use location: The vehicle must be used primarily in the United States.
- Modified Adjusted Gross Income (AGI) limits: Your income must not exceed these thresholds:
- $300,000 for married couples filing jointly or surviving spouses
- $225,000 for heads of households
- $150,000 for all other filers
Vehicle Battery Requirements
- The vehicle’s battery must have a capacity of at least 7 kilowatt-hours (kWh).
- The tax credit (up to $7,500) splits into two equal parts of $3,750 each, based on:
- Battery components sourcing: A required percentage of the battery components must be manufactured or assembled in North America.
- Critical minerals sourcing: A required percentage of the battery’s critical minerals must be extracted or processed in the U.S. or in countries with which the U.S. has free-trade agreements (or recycled in North America).
Sourcing Percentage Thresholds by Year
| Year | Battery Components Minimum % (Manufactured/Assembled in North America) | Critical Minerals Minimum % (Extracted/Processed in U.S. or Free Trade Partner) |
|---|---|---|
| 2023 | 50% | 40% |
| 2024 – 2025 | 60% | 50% (2024), 60% (2025) |
| 2026 | 70% | 70% |
| 2027 | 80% | 80% |
| 2028 | 90% | 80% |
| 2029 – 2032 | 100% | 80% |
If the vehicle meets both sourcing requirements, you qualify for the full $7,500 credit. If it meets only one, you may get a partial credit of $3,750.
Additional Notes
- The credit is nonrefundable, meaning it reduces your tax liability but won’t result in a refund if the credit exceeds taxes owed.
- Sellers must report and register the information about the vehicle’s qualification to the IRS at the time of sale; otherwise, the vehicle may not be eligible for the credit.
- Eligibility is available to both individuals and businesses.
In summary, to claim the tax credit on a new EV, ensure your income is within limits, the vehicle qualifies under battery size and sourcing rules, and the vehicle is purchased for personal use and primarily used in the U.S. The detailed battery sourcing thresholds become more stringent each year through 2032, affecting the credit amount you can claim.
This reflects the rules based on the Inflation Reduction Act updates effective from 2023 through 2032.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-eligibility-requirements-for-the-tax-credit-on-new-evs/
