IRA EV Federal Tax Credit with Gross Adjusted income exceeding 300K

[luisgarcia27]

My wife and I are looking to buy a new electric car (Tesla Model Y - 7 seats) this year (2023) and we are hoping to take advantage $7,500 Federal Tax Credit offered in the Inflation Reduction Act law. The only problem is that based on the law income limits our Adjusted Gross Income exceeds the $300k for married couples filing jointly. Now the adjusted gross income (AGI) for other filers is only 150k, my salary does not exceed that amount so we are wondering if we file our taxes separately and I can take advantage of the credit? If, so how would we need to do that to comply with the credit rules? File this year 2021 separately or file the next year 2023 separately?

[AnnetteB6 · Accepted solution]

Based on information from the IRS regarding the 2023 Credit for New Clean Vehicles purchased in 2023 or later, you may qualify for the credit based on your Adjusted Gross Income (AGI) being under a threshold amount for either the tax year of the year of purchase (2023) or the previous tax year (2022).  

Since you have not yet purchased the vehicle, you have the opportunity to take a look at your 2022 tax returns using the Married Filing Separate filing status in order to qualify for the credit on your 2023 tax return.  As long as your modified AGI falls under the threshold amount, then you would be able to claim the credit next year.    

Be aware that using the Married Filing Separate filing status is not always the most beneficial way to file for a married couple.  You should be cautious about doing so and compare to see if claiming the credit is truly beneficial.  Remember, your tax liability must be greater than the $7500 amount of the credit to receive the tax benefit because it is a non-refundable credit.  

One other thing to note, once you have filed a joint tax return you cannot amend your return to change to separate returns after the tax return due date.  This means that if you file a joint return for 2022, but filing separate returns for 2023 does not meet the credit threshold, then you will not be able to claim the credit.  

For reference, here is a link to the information available from the IRS website:  

Credits for New Clean Vehicles Purchased in 2023 or After