--- title: "Updated EV Tax Credit: FAQ Answered" description: Learn about changes to the Electric Vehicle tax credit, including new requirements, limits, and how to maximize your EV tax credit. image: https://blog.cmp.cpa/hubfs/EV-Tax-Credit-FAQ-Answered.jpg --- - [Contact Us](https://cmp.cpa/contact-us/) - [Bill Pay](https://cmp.cpa/my-account/) - [File Drop-Off](https://app2.gettruss.io/firm_drop_offs/new?auth_token=MTQyNyZ6OW1HeHh4NWhRbXNIRDF6RmU3OVZXRGJRUkV2aU5ZSGN0OXprNUtH&firm_user_id=3261) - [Client Portal](https://app2.gettruss.io/client_portals/sign_in?client_portal_name=CMP-CPA) [![CMP](https://blog.cmp.cpa/hubfs/Cookmartin-Dec2015/CMP-Logo.png "Cook Martin Poulson, P.C.")](https://cmp.cpa/) - [Home](https://cmp.cpa/) - [About](https://cmp.cpa/company/) - [Meet the Team](https://cmp.cpa/company/meet-the-team/) - [Community](https://cmp.cpa/company/community/) - [CMP Celebrates 40-Years In Business](https://cmp.cpa/company/news/) - [Careers](https://cmp.cpa/company/careers/) - [Reviews & Testimonials](https://cmp.cpa/reviews/) - [Services](https://cmp.cpa/services/) - [Tax Preparation](https://cmp.cpa/services/income-tax-services/) - [Financial Audits & Reviews](https://cmp.cpa/services/financial-statements-audits-and-reviews/) - [Business Valuation](https://cmp.cpa/services/business-valuations/) - [Estate and Succession Planning](https://cmp.cpa/services/estate-succession-planning/) - [ERISA / 401K Audits](https://cmp.cpa/services/erisa-audits/) - [Crypto Tax Accountant](https://cmp.cpa/services/crypto-tax/) - [Federal R&D Tax Credit](https://cmp.cpa/services/rd-tax-credit-services/) - [Utah R&D Tax Credit](https://cmp.cpa/services/utah-rd-tax-credit-services/) - [Bookkeeping and Payroll](https://cmp.cpa/services/bookkeeping-and-payroll-services/) - [Accounting Software Solutions & Consulting](https://cmp.cpa/services/accounting-software-solutions/) - [Retirement Plan Services and TPA](https://cmp.cpa/services/retirement-plan-tpa-services/) - [Cost Segragation Studies](https://cmp.cpa/services/cost-segregation/) - [Outsourced CFO](https://cmp.cpa/services/cfo-outsourced-solutions/) - [Industries](https://cmp.cpa/industries/) - [Farm and Ranch](https://cmp.cpa/industries/farm-ranch-accountant-service/) - [Real Estate and Construction](https://cmp.cpa/industries/real-estate-construction/) - [Retail and Wholesale](https://cmp.cpa/industries/wholesale-and-retail-accounting-services/) - [Nonprofit](https://cmp.cpa/industries/non-profits/) - [Manufacturing](https://cmp.cpa/industries/manufacturing/) - [Healthcare](https://cmp.cpa/industries/healthcare/) - [Technology](https://cmp.cpa/industries/software-technology/) - [Internet Marketing/YouTube](https://cmp.cpa/industries/internet-marketing-youtube/) - [Resources](https://cmp.cpa/resources/) - [Videos](https://cmp.cpa/videos/) - [Tools](https://cmp.cpa/resources/#tools) - [Important Documents](https://cmp.cpa/resources/#import-doc) - [Important Links](https://cmp.cpa/resources/#import-link) - [FAQ](https://cmp.cpa/resources/faqs/) - [Problems We Solve](https://cmp.cpa/problems-we-solve/) - [Blog](https://blog.cmp.cpa/)   Wasatch Front  [801-467-4450](tel:8014674450) |  Cache Valley [435-750-5566](tel:4357505566)[tel:8017428119](tel:8017428119) | Southern Utah  [435-269-4540](tel:4352694540) ![Salt-Lake-City-Utah.jpg](https://blog.cmp.cpa/hs-fs/hubfs/Cookmartin-Dec2015/Salt-Lake-City-Utah.jpg?width=1106&name=Salt-Lake-City-Utah.jpg "Salt-Lake-City-Utah.jpg") # Updated EV Tax Credit: FAQ Answered October 03, 2022 By [John Kane](https://blog.cmp.cpa/author/john-kane) Tax credits are one of the best ways to reduce your tax burden. Many people miss out on [federal tax credits](https://blog.cmp.cpa/small-business-tax-credits) because they don’t know about them or aren’t sure they qualify. One of the most significant new tax credits is the EV Tax Credit for people who purchase a qualified electric vehicle. Initially passed in 2008, the EV Tax Credit has recently been updated, and these changes can have a significant impact on your taxes. At CMP, we always aim to ensure our clients don’t pay more than required. With that in mind, here are some of the most frequently asked questions about the EV tax credit. ![$7,500 EV Tax Credit FAQ Answered - 1](https://blog.cmp.cpa/hs-fs/hubfs/$7%2c500%20EV%20Tax%20Credit%20FAQ%20Answered%20-%201.jpg?width=800&name=$7%2c500%20EV%20Tax%20Credit%20FAQ%20Answered%20-%201.jpg) ## What is the EV Tax Credit? The EV tax credit is meant to incentivize American drivers to move away from driving gas-powered vehicles and buy electric vehicles instead. Electric vehicles have lower carbon emissions than traditional cars, and driving them helps to reduce reliance on fossil fuels. The old tax credit, which expired on August 15, 2022, allowed taxpayers to deduct up to $7,500 from their taxes owed. The downsides of the old credit were that it was not refundable, which meant that some taxpayers received no benefit, and there were limits on how many consumers could claim the credit. Due to the new [Inflation Reduction Act](https://blog.cmp.cpa/inflation-reduction-act), the updated EV tax credit will provide between $2,500 and $7,500 in tax relief. The credit calculation is based on a complex formula that includes information about where the components of the car are manufactured and where the vehicle is assembled. As of right now, the new EV tax credit will be applied when you [file your federal tax return](https://cmp.cpa/services/income-tax-services/). However, the plan is to change that rule effective at the beginning of 2024, at which point taxpayers will have the option to claim the EV tax credit for a dollar-for-dollar reduction in the price of the car being purchased. ## How Does the Electric Vehicle Tax Credit Work? The EV tax credit used to be a dollar-for-dollar reduction in taxes owed. That structure benefited people who owed taxes at the end of the tax year but did nothing for people who earned a refund because the credit was non-refundable. If you bought an electric vehicle before August 16, 2022, you could still claim the old EV tax credit when you file your tax return. You’ll need to follow the same procedure for vehicles purchased between August 16, 2022, and December 31, 2023, until the procedure is updated in January 2024. ## What Are the Eligibility Requirements for the EV Tax Credit? There are three key requirements for people who want to take advantage of the EV tax credit. The first applies to the buyer’s income, the second to the value of the vehicle being purchased, and the third to the eligibility of the vehicle itself. ## What is the EV Tax Credit Income Limit? The Inflation Reduction Act places income limitations on who qualifies for the EV tax credit: - Single taxpayers or married people filing separately must have a modified adjusted gross income of $150,000 or less. - Married people filing jointly must have a modified adjusted gross income of $300,000 or less. - Single heads of household must have a modified adjusted gross income of $225,000 or less. If you're married and uncertain about the best way to file your taxes, our blog post is a must-read. We delve into the complexities of [Married Filing Jointly vs Separately](https://blog.cmp.cpa/married-filing-jointly-vs-separately), offering expert advice and real-world examples to help you weigh the options. Don't let confusion get in the way of making a sound financial decision – check out our blog post and take control of your tax planning today! The maximum income requirements for used vehicles are slightly lower: - $75,000 for an individual - $150,000 for married filing jointly - $112,500 for single heads of household If you meet these income requirements and purchase an electric vehicle that qualifies, then you can claim the EV tax credit when you buy a vehicle. ## Which Vehicles Qualify for EV Tax Credits? Here are the things you need to know about vehicle qualifications: - **Vehicle Cost**. An electric car must have a retail cost of $55,000 or less. The limit is $80,000 for electric trucks, vans, and SUVs. - **Vehicle Assembly**. Only vehicles assembled in North America are eligible for the new EV tax credit. - **Vehicle Components**. There is an exclusion for vehicles that include components from “foreign entities of concern,” including China and Russia. That exclusion goes into effect on December 31, 2023. - Must have a battery capacity of at least 7 kilowatt hours. - Have a gross vehicle weight rating of less than 14,000 lbs. - Must be made by a qualified manufacturer. [See list here](https://www.irs.gov/credits-deductions/manufacturers-and-models-for-new-qualified-clean-vehicles-purchased-in-2023-or-after).  (except FCV's) - **Vehicle Type**. New electric and fuel cell vehicles qualify, as well as some new plug-in hybrid vehicles. The new law also provides credit for some used vehicles. - **Vehicle Purchase**. The credit for used cars is available only when a used EV is purchased through a dealer. Most of this information you should be able to find on the sale sticker on the window. This is a fluid list, and has changed. Be sure to check with your accountant on what qualifies.  ## Does the EV Tax Credit Apply to Leased and Used Vehicles? One of the biggest differences between the old EV tax credit and the new one is that the new one applies, with certain restrictions, to used vehicles. It does not apply to leased vehicles. The requirements for used vehicles include lower income caps for eligible taxpayers. To claim the EV tax credit for a used electric vehicle, you will need to earn $75,000 or less as a single taxpayer. The limit is $112,500 for single heads of household and $150,000 for married couples filing jointly. Another requirement is that any used electric vehicle must be purchased from a dealership. In other words, private car sales between individuals are excluded from claiming the EV tax credit. Here are a few other requirements for used electric vehicles. - The vehicle must be at least two calendar years old. - The credit is not available to dealers who purchase EVs for resale. - The purchase price must be $25,000 or less. - The credit may only be claimed once per vehicle. ## Is There a Tax Credit for Fuel Cell Vehicles? The new EV tax credit does apply to fuel cell vehicles, provided that they meet the same requirements that apply to other electric vehicles. That means they must have their final assembly in the United States and meet the other requirements laid out in the new law. ## How Do You Claim the Electric Vehicle Tax Credit? Most tax credits require taxpayers to complete a tax form and attach it to their Form 1040. The old EV tax credit required the completion of [Form 8936](https://www.irs.gov/forms-pubs/about-form-8936)During the initial rollout of the new EV tax credit. Taxpayers will need to use the same method of filling out Form 8936. However, by the beginning of January 2024, consumers will have the option to claim EV tax credits at the point of sale. That means that consumers will receive an immediate price reduction based on their vehicle’s eligibility. For example, a $50,000 vehicle that qualified for the full $7,500 EV tax credit would be reduced in price from $50,000 to $42,500. Another way to look at it is that the new credit would allow you to save in two ways. If you’re paying cash for a vehicle, you will pay less because of the credit. If you’re financing the purchase of your vehicle, you will save on interest because you’d only need to borrow the reduced amount. ## Can You Claim Both Federal and State EV Tax Credit and Incentives? The federal EV tax credit applies to all qualifying US taxpayers. One of the questions we’ve been frequently asked is whether it’s allowed to claim both the federal credit and a state credit or incentive. The short answer is YES. Of course, you will need to meet state requirements to claim the credit. For example, as of 2022, Utah offers an EV tax credit only for heavy-duty vehicles and trucks. That may change in the future. We suggest reviewing your state’s laws or working with an experienced CPA to determine your eligibility. You can find a list of EV tax credits and incentives by state at the links below. - [Energy Sage](https://www.energysage.com/electric-vehicles/costs-and-benefits-evs/ev-tax-credits/) - [US Dept of Energy](https://afdc.energy.gov/laws) ## When Will the EV Tax Credit Be Available? The Inflation Reduction Act was signed into law by President Joe Biden on August 16, 2022. However, the new credit does not officially take effect until December 31, 2022. The gap creates a question about credit eligibility for people who have purchased new clean vehicles in 2022. The exception has been addressed by allowing taxpayers who qualified for the old credit to claim that credit when they file their 2022 tax returns. If you have purchased a qualifying EV and have not yet claimed your credit under the old law, there is still time to do so. Some consumers are holding off on purchasing a new EV until vehicle qualifications are more thoroughly outlined and EV tax credits improve even more. ## How Can I Maximize My EV Tax Credit? The amount of the EV tax credit is determined by a two-part formula that incorporates information about where the battery materials are processed or extracted as well as where the components are made. Here’s how it breaks down. - The first half of the tax credit, up to $3,750, is determined by the percentage of battery materials that are either extracted or processed in the United States or in a country that has a free trade agreement with the US. For 2023, the requirement for the full credit is that 40% of battery materials meet this requirement. The amount is slated to increase to 80% as of 2027. - The second half of the tax credit, also a maximum of $3,750, is based on where the majority of a vehicle’s battery components are assembled. The required percentage of assembly to take place in North America will start at 50% in 2023 and increase to 100% by 2029. The battery's final assembly must occur in the United States, Canada, or Mexico. Because the EV rules from the Inflation Reduction Act are still new, there is ongoing work to help consumers determine eligibility for vehicles. We anticipate that there will be updates to the IRS list of eligible vehicles, and we will update this post as new information becomes available. ## Our CPA Can Help You Take Advantage of the EV Tax Incentive The new EV tax credit included in the Inflation Reduction Act can help you save money when you purchase a new or used qualifying electric vehicle. If you’re in the market for a new car, you can use the credit to lower your up-front and financing costs, or if you’ve purchased recently, you can claim the credit for the 2022 tax year. Our qualified tax professionals can help you understand the EV tax incentive and maximize your benefits. [![Let's Talk: Schedule A Consultation Right Now.](https://hubspot-no-cache-na2-prod.s3.amazonaws.com/cta/default/1853761/f873bfd5-b98e-48ce-947e-bd3b908688a6.png)](https://hubspot-cta-redirect-na2-prod.s3.amazonaws.com/cta/redirect/1853761/f873bfd5-b98e-48ce-947e-bd3b908688a6) *This content is for educational purposes only and may not apply to your specific tax situation. Tax laws are complex, subject to change, and depend on individual circumstances. Consult a qualified tax advisor before relying on this information.* [![John Kane](https://blog.cmp.cpa/hs-fs/hubfs/Blog_Author/John-Kane.jpg?width=160&height=190&name=John-Kane.jpg)](https://cmp.cpa/team/john-kane/) About John Kane John enjoys interacting with clients and proactively working with them to create solutions to problems. John is a native of Logan and earned both a bachelor’s and a master’s degree in accounting from Utah State University. He has been with CMP, PC, since 2012. John’s primary focus is on businesses in the medical, manufacturing, retail, construction, and agriculture industries. In addition, John has extensive experience in IRS issue resolution. Prior to joining CMP, John worked in Idaho Falls for a CPA firm where he gained experience in auditing governmental and nonprofit entities. 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Trusted By: Trusted By: - ![](https://cmp.cpa/wp-content/uploads/Fisher-1.png) - ![](https://cmp.cpa/wp-content/uploads/kaddas-1.png) - ![](https://cmp.cpa/wp-content/uploads/Renegade.png) - ![](https://cmp.cpa/wp-content/uploads/cvm.png) - ![](https://cmp.cpa/wp-content/uploads/evolution.png) - ![](https://cmp.cpa/wp-content/uploads/Baicor.png) - ![](https://cmp.cpa/wp-content/uploads/Cliffside.png) - ![](https://cmp.cpa/wp-content/uploads/Vista-Healthcare.png) - ![](https://cmp.cpa/wp-content/uploads/Spartan-Logo.png) - ![](https://cmp.cpa/wp-content/uploads/SWSP-Southwest-Spine.png) - ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Rancho-Markets%201.png) - ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Highmark-Consturction-Logo.png) - ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Chanshare-Farms-Logo.png) - ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Mebie%20Baby%201.png) ![](https://cmp.cpa/wp-content/uploads/Fisher-1.png) ![](https://cmp.cpa/wp-content/uploads/kaddas-1.png) ![](https://cmp.cpa/wp-content/uploads/Renegade.png) ![](https://cmp.cpa/wp-content/uploads/cvm.png) ![](https://cmp.cpa/wp-content/uploads/evolution.png) ![](https://cmp.cpa/wp-content/uploads/Baicor.png) ![](https://cmp.cpa/wp-content/uploads/Cliffside.png) ![](https://cmp.cpa/wp-content/uploads/Vista-Healthcare.png) ![](https://cmp.cpa/wp-content/uploads/Spartan-Logo.png) ![](https://cmp.cpa/wp-content/uploads/SWSP-Southwest-Spine.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Rancho-Markets%201.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Highmark-Consturction-Logo.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Chanshare-Farms-Logo.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Mebie%20Baby%201.png) ![](https://cmp.cpa/wp-content/uploads/Fisher-1.png) ![](https://cmp.cpa/wp-content/uploads/kaddas-1.png) ![](https://cmp.cpa/wp-content/uploads/Renegade.png) ![](https://cmp.cpa/wp-content/uploads/cvm.png) ![](https://cmp.cpa/wp-content/uploads/evolution.png) ![](https://cmp.cpa/wp-content/uploads/Baicor.png) ![](https://cmp.cpa/wp-content/uploads/Cliffside.png) ![](https://cmp.cpa/wp-content/uploads/Vista-Healthcare.png) ![](https://cmp.cpa/wp-content/uploads/Spartan-Logo.png) ![](https://cmp.cpa/wp-content/uploads/SWSP-Southwest-Spine.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Rancho-Markets%201.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Highmark-Consturction-Logo.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Chanshare-Farms-Logo.png) ![](https://blog.cmp.cpa/hubfs/Trusted%20By%20Logo/Mebie%20Baby%201.png) ```json { "@context" : "https://schema.org", "@id" : "https://blog.cmp.cpa/ev-tax-credit#blogposting", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "John Kane", "url" : "https://blog.cmp.cpa/author/john-kane" }, "dateModified" : "2022-10-03", "datePublished" : "2022-10-03", "description" : "CMP answers frequently asked questions about the updated EV tax credit, including how it works, eligibility requirements, income limits, which vehicles qualify, and how to claim the credit.", "hasPart" : [ { "@id" : "https://blog.cmp.cpa/ev-tax-credit#faq" } ], "headline" : "Updated EV Tax Credit: FAQ Answered", "image" : { "@type" : "ImageObject", "height" : 1000, "url" : "https://blog.cmp.cpa/hs-fs/hubfs/%247%2C500%20EV%20Tax%20Credit%20FAQ%20Answered%20-%201.jpg?width=2000&height=1000&name=%247%2C500+EV+Tax+Credit+FAQ+Answered+-+1.jpg", "width" : 2000 }, "inLanguage" : "en", "mainEntityOfPage" : { "@id" : "https://blog.cmp.cpa/ev-tax-credit", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "height" : 86, "url" : "https://cmp.cpa/wp-content/uploads/CMP-Logo.png", "width" : 406 }, "name" : "CMP" } } ``` ```json { "@context" : "https://schema.org", "@id" : "https://blog.cmp.cpa/ev-tax-credit#faq", "@type" : "FAQPage", "mainEntity" : [ { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The EV tax credit is a federal incentive designed to encourage drivers to buy electric vehicles. Under the updated rules, eligible taxpayers may qualify for between $2,500 and $7,500 depending on vehicle requirements and credit calculations." }, "name" : "What is the EV Tax Credit?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The EV tax credit generally reduces taxes owed (it has been structured as non-refundable in prior versions). For purchases in the 2022–2023 period, taxpayers claim the credit when filing their federal return, with point-of-sale claiming planned to become available beginning in 2024." }, "name" : "How Does the Electric Vehicle Tax Credit Work?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Eligibility depends on three main factors: the buyer’s income, the value of the vehicle purchased, and whether the specific vehicle meets the program’s qualification rules." }, "name" : "What Are the Eligibility Requirements for the EV Tax Credit?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Income limits apply based on filing status. For new vehicles, the article explains limits of $150,000 (single or married filing separately), $300,000 (married filing jointly), and $225,000 (head of household). Used-vehicle limits are lower." }, "name" : "What is the EV Tax Credit Income Limit?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Qualifying vehicles must meet requirements such as MSRP caps (different limits for cars vs. trucks/SUVs), final assembly in North America, battery and weight criteria, and other component/manufacturer rules described in the post." }, "name" : "Which Vehicles Qualify for EV Tax Credits?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The post explains that the updated credit can apply to used vehicles (with restrictions), but it does not apply to leased vehicles. Used EV eligibility includes purchase from a dealer, price and age limits, and income caps." }, "name" : "Does the EV Tax Credit Apply to Leased and Used Vehicles?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Yes. The article notes the updated EV tax credit can also apply to fuel cell vehicles if they meet the applicable qualification requirements." }, "name" : "Is There a Tax Credit for Fuel Cell Vehicles?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Taxpayers generally claim the credit by completing the required form (the post references Form 8936) and filing it with their return. The article also explains point-of-sale claiming is planned to be available beginning in 2024." }, "name" : "How Do You Claim the Electric Vehicle Tax Credit?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Yes. The post states you can claim the federal EV credit and state incentives if you meet each program’s requirements, and it recommends reviewing state rules or working with a CPA to confirm eligibility." }, "name" : "Can You Claim Both Federal and State EV Tax Credit and Incentives?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "The article explains the Inflation Reduction Act was signed in August 2022, with the updated credit taking effect at the end of 2022, and it discusses timing considerations for 2022 purchases and claiming." }, "name" : "When Will the EV Tax Credit Be Available?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Maximizing the credit depends on meeting the requirements tied to battery materials and component assembly rules described in the post, along with income and vehicle qualification limits. The post notes eligibility guidance may evolve as IRS vehicle lists and rules are updated." }, "name" : "How Can I Maximize My EV Tax Credit?" } ] } ```