Which Car Purchase Can I Get a Tax Break For?

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The Inflation Reduction Act of 2023 introduced a variety of clean energy credits. However, these Clean Vehicle Tax Benefits do not apply to all vehicles or all EV or Hybrid vehicles.

Here is a breakdown of the U.S. Department of the Treasury’s requirements for car purchases to be eligible for a Green Energy Credit.

Green Energy Car Tax Credit Eligibility Requirements

Produced by Qualifying Manufacturers

Currently, only certain automakers and their associated brands meet the eligibility requirements. These manufacturers produce electric vehicles, plug-in hybrids, and fuel-cell vehicles.

Any car purchased from a different manufacturer will not qualify for the clean vehicle tax credit. Additionally, models from a qualifying manufacturer that are not included in the IRS’s list do not qualify.

For a list of qualifying manufacturers and models, click here.

Vehicle is Within Manufacturer Assembly Requirements

Vehicles listed under the qualifying manufacturers and models list don’t automatically qualify for a green energy credit. Vehicles must also be within manufacturing production limits. This qualification is measured by North America Final Assembly and MSRP Requirements:

• Have undergone final assembly in North America

To see if a specific vehicle meets the assembly requirements,

• Note the vehicle’s Vehicle Identification Number (VIN)

• Go to the Department of Energy’s page on Electric Vehicles with Final Assembly in North America

• Use the VIN Decoder tool under “Specific Assembly Location Based on VIN”

Vehicle is Within MSRP Limitations

In addition, for a vehicle to be eligible, it must meet MSRP limitations. It must not exceed a manufactured suggested retail price (MSRP) of:

• $80,000 for vans, sport utility vehicles, and pickup trucks

• $55,000 for other vehicles

Purchased On or After January 1, 2023

Vehicles purchased on or after January 1, 2023, are eligible for a clean vehicle tax credit, provided they meet all specified criteria.

If the car was purchased in 2022, the vehicle has different eligibility requirements, which can be found here.

Purchaser Meets Income Limitations

The Inflation Reduction Act set income limit eligibility requirements for individuals and households. These requirements are based on annual income and the purchase of a new or used vehicle.

Income Limitations for New Vehicles 

• Annual income of $150,000 or less for individuals and $300,000 or less for families of two adults or more. 

Income Limitations for Used Vehicles  

• Annual income of $75,000 or less for individuals and $150,000 or less for households. 

New Vehicle Purchase Price Limitations 

• New vans, sport utility vehicles, or pickup trucks must cost $80,000 or less. All other vehicles must cost $55,000 or less. 

Used Vehicle Purchase Price Limitations  

• Used vehicles must cost $25,000 or less, and the car must be two or more years old. 

Questions?

Have questions about whether you can optimize an upcoming car purchase to receive Clean Vehicle Tax Benefits? Our tax experts are here to help. Contact Us.