who can claim EV Tax credit while gifting a car

[taxfiler_292]

I plan to gift my wife an EV. I plan to have the new car title in her name.

However, I plan to take the loan in my name (not my wife's name). 

We file our taxes separately. In this case, who is eligible to claim tax credit? Would it be my wife? or me? Can someone point me to links which clarify how to claim tax credit in such situations?

[JulieS]

The credit can only be claimed by the owner of the car, so in this case, your wife would get the credit.

Here are the basic requirements to get the credit from the instructions for Form 8936:

• You are the owner of the vehicle. If the vehicle is leased, only the lessor and not the lessee, is entitled to the credit.

• You placed the vehicle in service during your tax year.

• The vehicle is manufactured primarily for use on public streets, roads, and highways.

• The original use of the vehicle began with you.

• You acquired the vehicle for use or to lease to others, and not for resale.

• You use the vehicle primarily in the United States.

The instructions do not mention anything about financing or gifting.

Click here to read the complete instructions.

[taxfiler_292]

Thanks, so ideally it does not matter who pays the loan on the car, right?

[JulieS]

That is correct.

[rkeval]

If there are 2 names on registrations:

 - Then who can apply for it? 

 - How tax bracket will be calculated if both are earning? (One is eligible for federal tax credit and another's income is out of tax credit bracket)

[PattiF]

Since you are both on the title, either one of you can take the credit.   As long as it's only claimed once. You must be USING the vehicle in order to claim the credit.  You can't just merely be on the title and claim the credit if you aren't using the vehicle.

The person who is eligible for the federal tax credit can apply for the EV Tax credit as long as they are using the car and their name is on the title.

From the IRS:

Who Qualifies

You may qualify for a credit up to $7,500 for buying a qualified new car or light truck. The credit is available to individuals and businesses.

To qualify, you must buy the vehicle: 

• For your own use, not for resale
• For use primarily in the U.S.

[momcao123]

If the person was added on to the title a few days after the purchase, would they also be able to claim the credit if they also use the vehicle?

[AnnetteB6]

No, both people on the title cannot claim the EV credit.  Only one person on the title can claim the credit.

@momcao123 

[momcao123]

Thank you for the quick response. My follow-up question would be then would the person added to the title a few days later be able to be the only person claiming the tax credit if they drive it mainly?

For more context: The husband bought the car and the loan is under his name. He then adds his wife, right after the purchase, to the title so she can drive the car as her primary vehicle. Would the wife be able to claim the tax credit?

[Vanessa A]

The person who buys the car and owns the car can claim the credit.  If the loan is just in his name, then she did not buy the car so she would not claim the credit. 

[momcao123]

That conflicts with what JulieS has answered above. Could you explain if there is confusion there? 

[AmyC]

The rules have changed much from the 2022 post by Julie to the 2023 post. Here are your best sources:

• Credits for New Clean Vehicles Purchased in 2023 or After
• Credits for New Electric Vehicles Purchased in 2022 or Before
• About Form 8834, Qualified Electric Vehicle Credit

[prakashbk]

I have a follow-up question in different situations...

Can I buy a car in my daughter's name (she is 18+, an undergrad student who filed her tax return in 2023; her parents did not claim her as a dependent) and claim a tax credit if her income is below the prescribed limit? 

P.S: Parents are filing jointly and not eligible for energy credit

[JulieS]

Yes, if your daughter is the original owner of the vehicle, she should be able to claim the credit, assuming all of the other requirements are met. 

If you buy the car in your name and gift it to her, neither of you would be eligible for the credit. 

Here's an excerpt from the IRS instructions for Form 8936:

"The following additional requirements must be met to qualify you for the credit.

• You are the owner of the vehicle. If the vehicle is leased, only the lessor and not the lessee is entitled to the credit.
• You placed the vehicle in service during the tax year.
• The original use of the vehicle began with you.
• You acquired the vehicle for use or to lease to others, and not for resale.
• You use the vehicle primarily in the United States. If you use the vehicle primarily outside the United States, see section 168(g)(4) for a list of exceptions that may apply."
   

So, you would‌ be gifting her the money that purchased the car, not the car itself. Depending on the price, and whether you have made other gifts, this may create a Gift Tax liability for you. Follow this link to learn more about that.