Hi @Choontan!
The income limits for this credit are based on your Modified Adjusted Gross Income (MAGI).
To calculate your modified adjusted gross income, take your AGI and "add-back" certain deductions. Many of these deductions can be rare, so it's possible your AGI and MAGI can be identical. Different credit and deductions can have differing add-backs for your MAGI calculation. According to the IRS, your MAGI is your AGI with the addition of the appropriate deductions, potentially including:
- Student loan interest
- One-half of self-employment tax
- Qualified tuition expenses
- Tuition and fees deduction
- Passive loss or passive income
- IRA contributions
- Non-taxable social security payments
- The exclusion for income from U.S. savings bonds
- Foreign earned income exclusion
- Foreign housing exclusion or deduction
- The exclusion under 137 for adoption expenses
- Rental losses
- Any overall loss from a publicly traded partnership
To meet the income limit test for the credit, you can either use the year the vehicle is purchased, or the prior year, whichever has income below the limit. So, for example, if your modified adjusted gross income (MAGI) is $320,000 in 2023 as married filing jointly, but is $275,000 in 2022, you would still qualify for vehicles purchased and delivered in 2023.
Further, the credits are per vehicle. So each vehicle potentially can generate up to a $7,500 credit, even multiple vehicles in the same year. The major limitation for this in any given year is your actual tax liability. These credits are not refundable and cannot be carried forward to future years, so if your tax liability is reduced to $0 and further credits remain, they can not be claimed.
Businesses are also eligible to claim the credit, but there are different calculations and the credit may be reported in different ways, depending on the structure of the business.
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