Income Limit to Claim EV Credit

[ElaineMarie]

I ordered an electric vehicle in May, with delivery estimated for early 2023.  The dealer thinks my vehicle will meet the  requirements to qualify for the EV credit under the IRA.  Will the income limit for claiming the credit will be based on my 2022 income or my 2023 income?  My 2022 income is unusually high because I made some Roth conversions after the stock market dropped, and I'm worried that this will make me ineligible for the credit.  

[GabyC-EA]

Hi @ElaineMarie,

 If you have a binding contract to purchase before August 16,2022, the income limits are as follow: 

- Married Filing Jointly with Modified Adjusted Gross income up to $300K

- Head of Household with Modified  Adjusted Gross income up to $225K

- Single with Modified  Adjusted Gross income up to $150K

To calculate your Modified Adjusted Gross Income (MAGI you must include all taxable income sources and that would include your converted amounts from your ROTH that would be treated as ordinary income. 

To ensure your EV vehicle qualifies for the credit under the IRA you can visit the Alternative Fuels Data Center .

Additionally, I would confirm you meet the criteria to qualify under the old rules ( the final assembly requirement does not apply before August 16, 2022) or the new IRA rules. To qualify under the old rules you must have a binding contract as defined by the IRS (for more info you can visit this link What Is a Written Binding Contract? ). 

Enjoy your day! 

[VincentL]

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.