EV Purchase for 2022

[sraja18]

Hello - 

I am interested in purchasing a Ford EV made here in North America by the end of the year (2022). A couple questions regarding the federal EV tax credit. 

1. Do the income limits apply for 2022 EV purchases? When do the income limits start for EV purchases? My understanding is that the income limits for the new Clean Air Act kicks in on Jan 1, 2023, but wanted to verify. 

2.  I looked on the IRS website and the sales for Ford will go over 200,000 units this quarter (ending 9/30/2022). But it sounds like the next quarter (until 12/31/2022) after 200K cars is still eligible for the full EV tax credit of $7500 (see IRS website). Does this mean that I can purchase a vehicle in Nov or Dec this year and still be eligible for the full EV credit ($7500)?

Thanks!

[KochuK · Accepted solution]

Hi sraja18, thanks for posting the questions.

Inflation Reduction Act of 2022 (IRA 2022) signed into law on 8/16/2022. Hence terms used here are “Pre-IRA 2022” and “Post-IRA 2022.”

To reply:

1. If you purchase and take possession of a qualifying electric vehicle after August 16, 2022 and before January 1, 2023, aside from the final assembly requirement (which you indicated - satisficed), the rules in effect before the enactment of the Inflation Reduction Act for the EV credit apply (including those involving the manufacturing caps on vehicles sold). Yes, there is no income limit for tax year 2022.  Income limits, vehicle price limits etc. start to apply in 1/1/2023 and onwards.

2. Here is the general rule for manufacturer/vehicle approaching 200,000 cap: Taxpayers may claim the full amount of the credit up to the end of the 1st quarter after the quarter in which the manufacturer records its sale of the 200,000th qualified vehicle. For the 2nd and 3rd quarters, taxpayers may claim 50% of the credit. For the 4th and 5th quarters, taxpayers may claim 25% of the credit. No credit is allowed after the 5th quarter. (Source - TheTaxBook research tool)

Please see below for Index for Manufacturers published by the IRS

https://www.irs.gov/businesses/irc-30d-new-qualified-plug-in-electric-drive-motor-vehicle-credit

Hope the above helps.

[PSUrbs]

However, TurboTax doesn't seem smart enough to differentiate?  Despite being Pre-IRA 2022 the online software is telling me the credit expired in 2021.

It won't let me proceed with Form 8910 with the following message:

"Check This Entry:  Alternative Motor Vehicle Worksheet (Vehicle 1: Rivian R1T): Date purchased must be before 2022.  This credit expired for vehicles purchased after 2021."

Any advice on how to get around or what the underlying issue is here?

[DaveF1006]

To clarify, are you claiming a vehicle purchased in 2021 but placed in service in 2022? Also are you using online or software?

@PSUrbs 

[PSUrbs]

I was using the online software.  I purchased the vehicle and put it into service in 2022 pre IRA (in June).  When trying to submit my taxes it wouldn't let me submit because the credit expired in 2021.  I eventually figured out the issue.  TurboTax added the Form 8910 which is the old form and did expire in 2021 instead of adding the Form 8936 which allowed my submission with 2022 purchase and service dates.  I have no idea why it selected the wrong form (likely due to my bad input) but I was able to delete the stuff added by the wizard and manually add a 8936 form.  Annoying, but here we are, credit credited and taxes submitted.