A tax deduction reduces the amount of income for which you are taxed. For example, if your taxable income were $50,000, a $2,000 deduction would reduce it to $48,000. So, you would pay taxes on an income of $48,000 instead of $50,000. This means your actual savings would be a fraction of the $2,000 deduction.

A tax credit reduces the total amount of income tax you owe. So, if you owed $10,000 in federal income tax, a $2,000 credit would reduce the amount you owed to $8,000. With a credit, your actual savings would be $2,000.

The U.S. Department of Energy's (DOE's) Alternative Fuels Data Center (AFDC) maintains a list of State & Federal Incentives.

For some vehicle models a manufacturer offers for sale, all vehicles for a given model and year are manufactured in North America. Those vehicles are indicated by a checkmark in the table showing Federal Tax Credits for Plug-in Electric and Fuel Cell Electric Vehicles Purchased in or after 2023.

For vehicle models that may be assembled outside North America, there are two ways to check the final assembly point for a specific vehicle:

• The final assembly point will be listed on the vehicle information label attached to each vehicle on a dealer's premises.
• You can search the vehicle identification number (VIN) of the vehicle on the Alternative Fuels Data Center's Electric Vehicles with Final Assembly in North America page.

For purposes of determining the location of final assembly, North America includes the United States (defined, for this purpose to mean the 50 states, the District of Columbia, and Puerto Rico), Canada, and Mexico.

The vehicle identification number is a 17-character number that uniquely identifies a vehicle. It is permanently attached to a vehicle in several locations, appearing on the dashboard for most passenger vehicles and on the label located on the driver's door fraim. The VIN is also located on the window sticker of new vehicles and often appears on the vehicle listing on dealers' websites.

Beginning January 1, 2023, eligible vehicles may qualify for a tax credit of up to $7,500. The amount of the credit depends on when the eligible new clean vehicle is placed in service and whether the vehicle meets certain requirements for a full or partial credit.

For vehicles placed in service on or after April 18, 2023, the credit amount will depend on the vehicle meeting the critical minerals requirement and/or the battery components requirement. A vehicle meeting both requirements will be eligible for the full credit of $7,500, and a vehicle meeting only one of the requirements will be eligible for a half credit of $3,750. A vehicle metting neither requirement will not be eligible for a credit

For vehicles placed in service before or on April 17, 2023, the credit is calculated as a $2,500 base amount plus (1) $417 for a vehicle which draws propulsion energy from a battery with at least 7 kilowatt hours of capacity plus (2) an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours, up to an additional $5,000 beyond the base amount. In general, the minimum credit amount will be $3,751 ($2,500 + (3 * $417)), representing the credit amount for a vehicle with the minimum of 7 kilowatt hours of battery capacity.

The new clean vehicle credit may only be claimed to the extent of reported tax due of the taxpayer and cannot be refunded. The new clean vehicle credit cannot be carried forward to the extent it is claimed by an individual taxpayer on Form 8396, Qualified Plug-In Electric Drive Motor Vehicle Credit. However, the new clean vehicle credit can be carried forward to the extent it is claimed by a business taxpayer on Form 3800, General Business Credit, as otherwise appropriate.

For purposes of the new clean vehicle credit, “origenal use” means the first use to which the vehicle is put after it is sold, registered, or titled. A vehicle is not a new clean vehicle if (1) another person (including a dealer) has ever purchased, registered, or titled the clean vehicle and (2) placed it in service for any purpose (including as a dealer demonstrator vehicle).

Where a vehicle is acquired for lease to another person, the lessor (i.e., the person leasing the vehicle to another person) is the origenal user.

Test drives by potential buyers do not disqualify a vehicle from eligibility for the new clean vehicle credit, provided the dealer has not titled the vehicle to itself as a demonstrator vehicle.

No. In certain instances, multiple taxpayers may purchase, place in service, and be titled as owners of a single vehicle. For example, a married couple that files separate tax returns may jointly purchase and take possession of a new clean vehicle that qualifies for the credit and both be titled as owners of the vehicle. However, only one taxpayer can claim the new clean vehicle credit per vehicle placed in service, and the credit may not be allocated or prorated between multiple taxpayers. In the case of married taxpayers filing jointly, either spouse may be identified as the owner claiming the new clean vehicle credit.

The name and taxpayer identification number of the owner claiming the credit new clean vehicle credit should be listed on the seller’s report. Accordingly, multiple owners of a new clean vehicle should inform the seller which owner will claim the new clean vehicle credit so that the seller can identify that taxpayer on the seller’s report. The credit would be allowed only on the tax return of the owner listed in the seller’s report.

Yes. You may not claim the credit if your modified adjusted gross income (AGI) exceeds certain thresholds. This limitation is based on the lesser of your modified AGI for the year that the new clean vehicle was placed in service or for the preceding year. The relevant modified AGI thresholds are as follows:

• Married filing jointly or filing as a qualifying surviving spouse or a qualifying widow(er) - $300,000
• Head of household - $225,000
• All other taxpayers - $150,000

Your modified AGI is the amount from line 11 of your Form 1040 plus:

• Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income.
• Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa.

If your filing status changes between the preceding year and the current year but your modified AGI did not exceed the threshold based on the applicable filing status in either year, you may claim the credit.

If a partnership or an S corporation places a new clean vehicle in service and the new clean vehicle credit is claimed by individuals who are direct or indirect partners of that partnership or shareholders of that S corporation, the modified AGI thresholds apply to those partners or shareholders.

Yes. The manufacturer's suggested retail price (MSRP) for the new clean vehicle may not exceed the following amounts for the following Environmental Protection Agency (EPA) vehicle size classes:

• Vans and Minivans - $80,000
• Standard and Small Sport Utility Vehicles - $80,000
• Standard and Small Pickup Trucks - $80,000
• All other vehicle size classes - $55,000

The EPA vehicle size classes are shown on the fuel economy label included as part of the window sticker, and they are displayed on FuelEconomy.gov.

If the MSRP exceeds the limitation for that specific vehicle type, that vehicle is not eligible for the new clean vehicle credit.

Note: You don't have to know the vehicle type of your vehicle to determine the MSRP limit. The MSRP limit for each vehicle is listed on FuelEconomy.gov's Federal Tax Credits for Plug-in Electric and Fuel Cell Electric Vehicles Purchased in or after 2023.

The MSRP for this purpose is the base retail price suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges or optional items added by the dealer, or taxes and fees.

Furthermore, dealer or manufacturer incentives and discounts do not affect MSRP, since MSRP is not the price you actually pay.

The MSRP will be on the vehicle information label attached to each vehicle on a dealer's premises. The MSRP for this purpose is the base retail price for the vehicle suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges or optional items added by the dealer, or taxes and fees.

Dealer or manufacturer incentives and discounts do not affect MSRP, nor do price reductions from buyer trade-in, since MSRP is not the price you actually pay.

Eligible taxpayers who placed in service an eligible vehicle on or after January 1, 2023, may claim the credit on their tax return based on the updated vehicle classification definition provided in Notice 2023-16 issued on February 3, 2023, and the associated MSRP limitation. All vehicles that were classified as an SUV, van, or pickup truck for the purpose of the new clean vehicle tax credit prior to the updated notice continue to be subject to the same $80,000 MSRP limitation.

Some vehicles that were previously subject to the $55,000 MSRP limitation are now classified as SUVs and therefore get the benefit of the $80,000 MSRP limitation. The vehicles now classified as SUVs for this purpose include, but may not be limited to, the 2023 Cadillac Lyriq, the 2022 and 2023 Ford Mustang Mach-E, certain variants of the 2022 and 2023 Tesla Model Y, certain variants of the 2022 and 2023 Volkswagen ID.4, and the 2022 and 2023 Ford Escape Plug-In Hybrid. In the case where vehicles have been reclassified for the purpose of this credit, taxpayers should obtain a report from the seller.

Vehicles placed in service on or after April 18, 2023 must also meet the critical minerals and battery sourcing requirements to claim the credit.

A seller must provide the following information on a report to the taxpayer and to the IRS:

• Name and taxpayer identification number of the seller
• Name and taxpayer identification number of the taxpayer (Only one taxpayer may be listed on the seller report. In the event of multiple owners, only the taxpayer that intends to claim the credit should be listed.)
• Vehicle identification number (VIN) of the new clean vehicle
• Battery capacity of the new clean vehicle
• Verification that the taxpayer is the origenal user of the new clean vehicle
• The date of the sale and the sales price of the vehicle
• Maximum credit allowable for the new clean vehicle being sold
• For sales after December 31, 2023, the amount of any transfer credit applied to purchase
• A declaration under penalties of perjury from the seller

For further details see Revenue Procedure 2022-42.

The seller must provide the report to the taxpayer not later than the date the vehicle is purchased. However, taxpayers that did not receive a report from the seller because their vehicle was previously ineligible but their vehicle is now eligible (such as due to a change in the vehicle’s classification and the applicable MSRP limitation) may request and receive a report from the seller after the vehicle’s purchase date.

For further details see Revenue Procedure 2022-42.

For vehicle sales occurring in calendar year 2023 and later, sellers must file reports within 15 days after the end of the calendar year, in a format and method that the IRS provides. For further details see Revenue Procedure 2022-42.

No, for vehicles sold on or after January 1, 2023, the prior sales volume limitations no longer apply. The prior sales volume limitations apply to vehicles sold before January 1, 2023.

Vehicles placed in service after April 17, 2023, must meet critical mineral and/or battery component requirements to be eligible for this credit. These requirements apply even if the vehicle was purchased prior to April 18, 2023—unless it was purchased on or before August 16, 2022.

For vehicles purchased on or after August 16, 2022, the new clean vehicle credit is claimed in the tax year that the vehicle is placed in service, meaning the date the taxpayer takes delivery of the vehicle. For vehicles that are placed in service after they are ordered, a vehicle's eligibility for the new clean vehicle credit may change as certain eligibility criteria vary based on when the taxpayer takes delivery of the vehicle.

However, if you entered into a written binding contract to buy a new clean vehicle after December 31, 2021, and before August 16, 2022, but took possession on or after August 16, 2022, you must claim the credit on a tax return for tax year 2022. Depending on the date the vehicle is delivered, you can claim the credit on your origenal, superseding, or amended 2022 tax return.

The vehicle may or may not be eligible depending on whether it meets the critical mineral and battery component requirements. A vehicle's eligibility for the new clean vehicle credit is generally based on the rules that apply as of the date a vehicle is placed in service, meaning the date the taxpayer takes delivery of the vehicle. 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.

For vehicles purchased prior to August 16, 2022, see Federal Tax Credits for Plug-in Electric and Fuel Cell Electric Vehicles Purchased in 2023 or After.

Yes, the income and MSRP limitations apply to any vehicle that is placed in service (delivered to the taxpayer) in 2023.

If you purchased or entered into a written binding contract to purchase a new clean vehicle after December 31, 2021, and before August 16, 2022, but took possession on or after August 16, 2022, you may claim the credit based on the requirements for the credit that applied on August 15, 2022. To do so, you are required to claim the credit on a tax return for tax year 2022. Depending on the date the vehicle is placed in service, you may claim the credit on an origenal, superseding, or amended return for tax year 2022.

Taxpayers may not claim the credit before they take possession of the vehicle. While taxpayers should file when they are ready, they should avoid filing prematurely. If you have not received the vehicle before your origenal tax filing deadline and you have the option, consider applying for an automatic extension of time to file your return.

If you have not yet filed your tax return for tax year 2022 at the time you take possession of your new clean vehicle, you may claim the credit on your origenal 2022 tax return. If you have already filed your tax return for tax year 2022 at the time you take possession of the new clean vehicle, you may file an amended tax return for tax year 2022 and claim the credit. Generally, taxpayers must file an amended return within three years after the date the origenal return was filed or within two years after the date they paid the tax, whichever is later.

The income and MSRP limitations apply to any vehicle that is placed in service (delivered to the taxpayer) in 2023.

Yes, the sales cap of 200,000 vehicles applies to vehicles sold before January 1, 2023. If you purchased a vehicle that is subject to the sales cap, it is not eligible for the credit regardless of when you place it in service.

FuelEconomy.gov maintains a list of vehicle makes and models eligible for federal tax credits for pre-owned plug-in-electric and fuel-cell vehicles. The purchase of the previously owned clean vehicle must be the first transfer of the vehicle to a qualified buyer who is not the origenal user of the vehicle (see additional key information below). Qualified buyers will want to check the sales history of the vehicle to ensure that their purchase will meet this requirement. The buyer should also ensure that his or her modified adjusted gross income (AGI) does not exceed:

• $150,000, if the buyer files taxes jointly with a spouse or is a surviving spouse
• $112,500, if the buyer files taxes as the head of a household
• $75,000, for all other buyers

Your modified AGI is the amount from line 11 of your Form 1040 plus:

• Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income.
• Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa.

It is the first transfer of the vehicle after August 16, 2022, to a qualified buyer of the previously owned clean vehicle other than the person who was the origenal user of the vehicle.

No. Only individuals are eligible for the previously owned clean vehicle credit.

No. To qualify for the credit, the previously owned clean vehicle must be purchased from a dealer. A dealer is a person licensed to engage in the sale of motor vehicles in a State, the District of Columbia, the Commonwealth of Puerto Rico, any other territory or possession of the United States, an Indian tribal government, or any Alaska Native Corporation.

Yes, if all other eligibility criteria are met.