Most tax payers are cash basis. This means you incur a deductible expense when it is paid and not based on a promise (credit). If you pay in 2022, it can be deducted in 2022. The same for 2023.
The Inflation Reduction Act extends the Clean Vehicle Credit until the end of 2032 and creates new credits for previously-owned clean vehicles and qualified commercial clean vehicles.
Tax credits include up to:
- $7,500 for the purchase of new qualified commercial clean vehicles;
- $40,000 for vehicles over 14,000 pounds; and
- the lesser of 30 percent of the price of used electric vehicles or $4,000.
Limitations apply based on the manufacturer’s suggested retail price of the vehicle. There are also limitations for the new vehicle credit based on adjusted gross income (AGI) thresholds – for single or married filing separately taxpayers, the limit is $150,000; for taxpayers filing as head of household, the limit is $225,000; and for married filing jointly, or surviving spouse taxpayers, the limit is $300,000. Reduced AGI limitations apply to the used vehicle credit.
Starting in 2024, the Inflation Reduction Act establishes a mechanism that will allow car buyers to transfer the credit to dealers at the point of sale so that it can directly reduce the purchase price.
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