Selling EV same year as purchased, still able to use the EV Tax Credit?

[zengray]

I bought an EV in April 2019, and planning to sell it now (Dec 2019).  I put about 18k miles during the time of ownership.

So I have a few questions:

1) Is there a time frame that I have to own the car in order to qualify for the tax credit?

2) Will I still be eligible to file for tax credit if I sold the car same year as purchased?

3) Do I need to submit any document to prove that I am the original owner, so that the "new owner" cannot file it?

Thanks.

[Vanessa A]

1) Yes, you would need to own the vehicle for 3 full years to not end up having to pay back the credit or part of the credit.  

2) No, you would not be able to take the credit.  The recapture amount for the first year of service is 100% so even if you did take the credit you would need to pay it back in full.

3) The new owner would have to prove their right to claim the credit.  This is not something you need to deal with. 

EV Credit Recapture

[dmertz]

There is no recapture requirement for the credit for a qualified plug-in electric vehicle under § 30D.  The recapture mentioned in CFR § 1.30-1 is for a credit taken on an electric vehicle under § 30, not § 30D.  § 30 was repealed in 2014, so the credit that had been allowed under that section is no longer available.

To answer the original questions:

1. No, there is no minimum amount of time you have to own the qualified plug-in electric vehicle to qualify for the credit as long as you can establish that you purchased the car for your original use and not for resale.
2. Yes, you can still qualify for the credit even if you sell the car in the same year, provided you meet the general requirements, including the requirement that you are the original purchaser.
3. No, you would only need to submit documentation if the IRS challenges the credit on your tax return due to suspecting that you bought the car for resale and not for personal use (or for some other reason unrelated to you selling the car).

[Morgan_M]

These two answers say opposite things - what’s the current best information?

[RaifH]

There is currently no requirement on the plug-in electric drive motor vehicle credit for length of ownership. As long as you were the original owner and did not purchase it with the intent of reselling it, then you are eligible for the entire credit with no requirement that any needs to be repaid if you do end up reselling it in the same year. 

As @dmertz said, the IRS can challenge your assertion if they suspect your original intent was for resale. From the IRC 30D, the only time the credit was can be recaptured is if one of these ceases to be true:

• (A) the original use of which commences with the taxpayer,
• (B) which is acquired for use or lease by the taxpayer and not for resale,
• (C) which is made by a manufacturer,
• (D) which is treated as a motor vehicle for purposes of title II of the Clean Air Act,
• (E) which has a gross vehicle weight rating of less than 14,000 pounds, and
• (F) which is propelled to a significant extent by an electric motor which draws electricity from a battery which— (i) has a capacity of not less than 4 kilowatt hours, and (ii) is capable of being recharged from an external source of electricity.

@Morgan_M

[jpck_0424]

Hello,
So what about in the case of a full-on battery electric vehicle (BEV) with tax deductions worth $7500? For example, I bought a Hyundai Kona Electric a couple of months ago, but now I regret it because it is too small for our family. Because I didn't purchase it with the intent to resale, would I be allowed to still claim that federal tax credit if I were to sell it a couple months later? Thanks.

[Mike9241]

you would need to be audited because there would be no disallowance unless you concede you bought to resell.  if audited, you might be asked if you bought with the intent to sell.  you might also be asked why you didn't realize it was too small before you purchase it. there may be additional questions to enable the agent to make a determination of your intent. 

please note 

1st you would need to be audited this can be through a notice questioning your return or require you to visit a local IRS office. about the only way the IRS would know you sold the vehicle is if you sold it at a gain (basis is reduced by the credit) which would require reporting the sale on schedule D. There is no question about selling the vehicle on the tax form on which you will claim the credit

2nd even if audited, no questions may be raised about the credit. 

3rd less than 2% of returns are audited and the lower the items on the tax return the lower the prospect. however, if you are required to report the sale, that could be a red flag for audit.

[DoninGA]

---

@jpck_0424 wrote:

Hello,
So what about in the case of a full-on battery electric vehicle (BEV) with tax deductions worth $7500? For example, I bought a Hyundai Kona Electric a couple of months ago, but now I regret it because it is too small for our family. Because I didn't purchase it with the intent to resale, would I be allowed to still claim that federal tax credit if I were to sell it a couple months later? Thanks.

---

Yes, you can still claim the credit on your 2022 tax return since your intent was to use the vehicle as your personal vehicle.

If you sell the vehicle for less than the purchase price you do not report the sale on your tax return. 

However, if you do sell the vehicle for more than the purchase price then you have to report the gain on the sale on your tax return.  The gain on the sale of a personal vehicle would be taxed at the long term capital gain tax rate.

[rrobster]

What if I am the purchaser of the electric vehicle and it is initially registered in my name and then I gift the vehicle to my son and transfer the title to his name?  Would I be able to claim the credit since no money was exchanged like you would have on a sale of the vehicle?

[Vanessa A]

No, you would not be able to claim the credit if you transferred ownership to your son whether or not he paid you for it or not.  In order to claim the credit you must own the EV.  If you dispose of the vehicle within 3 years, you would need to pay back some or all of the credit. 

[AmeliesUncle]

---

@Vanessa A wrote:

No, you would not be able to claim the credit if you transferred ownership to your son whether or not he paid you for it or not.  In order to claim the credit you must own the EV.  If you dispose of the vehicle within 3 years, you would need to pay back some or all of the credit. 

---

Section 30 was repealed in 2014. The EV credit is section 30D, and the 3-year recapture provision of Section 30 would not apply to Section 30D.

However, the credit only applies for a vehicle "which is acquired for use or lease by the taxpayer and not for resale".  That seems to be questionable in this situation.

[Kittybae]

Can anyone answer if the vehicle was purchased in 03/23 and in same month it was in an accident and totaled, does recapture apply?  I know in the old version of the law - loss due to accident/casualty was an exception to recapture.  Does anyone know if it still is an exception or did that change after the repeal in 2014? 

[PattiF]

You are not required to recapture the credit. You were qualified to receive the credit when the car was purchased. The accidental loss of the car does not qualify as an event that would require you to pay this credit back. 

@Kittybae 

[evanryu1124]

Hi I purchased a Tesla model Y in January, 2023 and I was planning to sell in April, 2023.  And I purchase another Tesla model Y in 2023.  Would I be still eligible for the IRS 7,500 federal credit for both vehicle?  I purchased both vehicle for my personal use but I would sell the first one since the vehicle was making noise.  I would appreciate for your expert advice.

[BenMog]

I purchased Mod Y too in February and looking to sell soon, @evanryu1124 Just wondering how best to sell or what platform you used and also how much lost I should be looking at. Thanks