The IRS has issued proposed regulations regarding new clean vehicle credits. The Inflation Reduction Act allows a maximum credit of $7,500 per vehicle, consisting of $3,750 for vehicles that meet certain requirements relating to battery components, and $3,750 for vehicles that meet certain requirements relating to critical minerals.
The proposed regulations say that the critical mineral and battery component requirements will apply to vehicles placed in service on or after April 18, 2023.
New clean vehicles placed in service on or after April 18, 2023, are subject to the critical mineral and battery component requirements even if the vehicle was ordered or purchased before April 18, 2023. A vehicle’s eligibility for the new clean vehicle credit is generally based on rules that apply as of the date a vehicle is placed in service, which is defined as the date the taxpayer takes delivery of the vehicle. Bottom line, a vehicle may or may not be eligible depending on whether it meets the critical mineral and battery component requirements.
Be aware though, that in addition to the above, other restrictions apply to claim the credit. These include, but are not limited to, the taxpayer’s modified adjusted gross income (AGI), which may not exceed $300,000 for married couples filing jointly, $225,000 for heads of household and $150,000 for all other filers. You are allowed to use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. Credits are also available for used EVs purchased from a dealer.
To check if a specific make and model meets the critical mineral and battery components, visit Fuel Economy.gov, and check with your R&A advisor for additional guidance.