Trading in EV I purchased in May of this year. Worried about tax credit.

[hypebeast]

I'm thinking about trading in the EV I purchased in May of this year for an upgraded model of the same car next month.  When I bought my car they were really hard to get(and still are) and I never expected to have an opportunity to upgrade to the exact model and make that I wanted.  Will this negate or put in jeopardy the tax credit that my car qualified for in May if I trade it for the upgraded model?

Cheers  

[VincentL]

You are able to purchase as many EVs as you want. When you file your taxes in 2023 the credit will attached to the EX you chose the credit for. You are never bound to use a credit until you file your taxes.

[KochuK]

Hi brettshipe, thanks for the event question.

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.”

It is my opinion that "substance over form" that you only purchased one EV during 2022 and eligible for claim EV credit once. I assume for the upgrade, you would receive a new delivery/title transfer between 8/16/22 to 12/31/22. During this time, the "Pre-IRA 2022" rules apply + one extra provision of final assembly in North America.

If all conditions are met, there is no difference in EV credit if delivery was in May 2022 (do not need to be assembled in North America) or October 2022 (need to be assembled in North America).

Please look at page 2 of below link, under the column of "Pre-IRA 2022" under the label of "Plug-in EV credit": the highlights are -

*Max amount could be $7,500 non-refundable credit;

*Phaseout after 200,000 plug-in EVs manufactured and sole

Clean Vehicle Tax Credits in the Inflation Reduction Act of 2022

https://crsreports.congress.gov/product/pdf/IN/IN11996

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

Thank you and hope the above helps.

[hypebeast]

Thanks for the reply.  Very helpful.  To be specific, the cars in question are both Toyota RAV4 Primes.  The original was an SE and I'm upgrading to the XSE. 

In May, Pre-IRA 2022, the Prime SE I purchased qualified for the full federal credit.   The new purchase would be in October or November of 2022, Post-IRA 2022, not qualifying based on the assembly provision.  

I wasn't worried about trying to double up on the credit, but I wouldn't want to do the upgrade if it jeopardized the original credit from May, as it is the only one that I would be eligible for.  

Based on the information you provided it seems that trading in the car won't have any effect on the tax credit.  So upgrading won't be an issue.    

[KochuK]

If you upgraded to a new EV vehicle Rav 4 XSE, for example, October 2022, I would assume the delivery/title transferred in October, 2022. According to you, the car does not qualify for North America assembly requirement, then you are not eligible for EV credit.

Please contact dealer to see how  the paperwork is to be prepared.

If somehow, it is dated May 2022, then you would qualify for EV credit based on "Pre-IRA 2022" rules since North America assembly is not a requirement during 1/1/2022 - 8/15/2022 EV deliveries.

[hypebeast]

Hi Vincent, Appreciate you replying. 

To be clear, I only have one tax credit that I qualified for when I bought the EV in May.  I solely want to know if trading the car in jeopardizes the credit that I qualified for.  I'm assuming it does not.  I'll have the bill of sale and everything I need when I file my taxes this coming year.    

[jtattb]

KochuK and CPA Experts,

Have a question about a statement.  In the Clean Vehicle Tax Credits "Transition Period" - Aug 16-Dec 31, 2022 in the updated website: 

https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d

"

Vehicles Purchased and Delivered between August 16, 2022 and December 31, 2022

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, 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)."

Highlighted in bold and italics - is that statement interpretated as "final assembly requirement" NOT required with that modifier - "aside" - in front; and thus all rules "aside" from that are followed.