The New Electric Vehicle Credit and How to Get It

By: Jiaguang "Jay" Zhu and Nikul Patel

To accelerate the transition towards sustainable transportation and reduce carbon emissions, the United States has recently introduced a new Electric Vehicle (EV) credit. This credit aims to incentivize individuals and businesses to embrace electric vehicles by offering financial benefits and promoting cleaner mobility alternatives. The introduction of this credit marks a significant step forward in the country's commitment to combat climate change and foster a greener future.

How to Receive Credit

  1. Qualifications for Vehicles
    To qualify, a vehicle must:
    • Have a battery capacity of at least 7-kilowatt hours;
    • Have a gross vehicle weight rating of less than 14,000 pounds;
    • Be made by a qualified manufacturer;
    • Undergo final assembly in North America;
    • Meet critical mineral and battery component requirements (as of April 18, 2023);
    • The vehicle's manufacturer suggested retail prices (MSRP) can't exceed $80,000 for vans, sport utility vehicles, and pickup trucks or $55,000 for other vehicles.
  2. Credit Amount
    The amount of the credit depends on when you placed the vehicle in service (took delivery), regardless of the purchase date.

    For vehicles placed in service from January 1 to April 17, 2023:
    • $2,500 base amount.
    • Plus $417 for a vehicle with at least 7 kilowatt hours of battery capacity.
    • Plus $417 for each kilowatt hour of battery capacity beyond 5 kilowatt hours.
    • Up to $7,500 hours.

    Vehicles placed in service from April 18, 2023 and after must meet all of the same criteria listed above, plus meet new critical mineral and battery component requirements for a credit up to:
    • $3,750 if the vehicle meets the critical minerals requirement only.
    • $3,750 if the vehicle meets the battery components requirement only.
    • $7,500 if the vehicle meets both.
  3. Income Limit: In order to get the credit, a taxpayer's modified adjusted gross income (AGI) may not exceed:
    • $300,000 for married filing jointly.
    • $225,000 for heads of households.
    • $150,000 for all other filers.
  4. In order to claim the credit, Form 8936 needs to be filled, and the detailed vehicle purchase agreement, including model, MSRP, VIN, Date, etc. are necessary.

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