Electric Vehicles

Transportation and vehicles are the most significant contributor to US greenhouse gas emissions. In an effort to decrease the impact of the transportation sector on the environment, the IRA introduces incentives for individuals, businesses, and nonprofits when purchasing cleaner vehicles. While the IRA also has benefits and credits for more sustainable manufacture, components, and fuel/chargers for such vehicles, as well as decarbonization, grants for research on the potential of new biofuels and hydrogen, and more, this section will focus on the credits and incentives that would be useful and are accessible to congregations and individuals.

Read more about the specific programs and credits below.

Clean Vehicle Credit

This is a tax credit that is available to individual consumers purchasing a new clean vehicle.

IRA Section 13401. Tax Code Section 30D.

  • You can qualify for credit up to $7500 if you buy a new qualified plug-in EV or fuel cell electric vehicle.

    To qualify, you must:

    - buy it for your own use and not resale

    - use it primarily in the US

    - your modified adjusted gross income (either of the current or previous year, whichever is less) may not exceed:

    —> $300,000 for married couples filing jointly

    —> $225,000 for household heads

    —> $150,000 for individual filers

    For the vehicle to qualify, it must:

    - have battery capacity of at least 7 kilowatt hours

    - have gross vehicle weight rating of less than 14,000 pounds

    - be made by a qualified manufacturer (excluding fuel cell EVs)

    - undergo final assembly in North America

    - meet critical mineral and battery component requirements

    For the sale to qualify:

    - the vehicle must be bought new

    - the seller reports required info to you at time of sale and to IRS (seller is required to report your name and taxpayer ID number to IRS for your eligibility to claim the credit)

    - vehicle’s MSRP can’t exceed:

    —> $80,000 for vans, sport utility vehicles, and pickup trucks

    —> $55,000 for other vehicles

    **Starting in 2024, qualifying vehicles cannot have battery components manufactured or assembled by a foreign entity of concern. Starting in 2025, qualifying vehicles’ batteries cannot contain critical minerals extracted, processed, or recycled by a foreign entity of concern.

  • For vehicles placed in service Jan 1 to Apr 17, 2023:

    - $2500 base amount

    - additional $417 for each kilowatt hour of battery capacity beyond 5 kilowatt hours

    - additional $417 for vehicle with at least 7 kilowatt hours of battery capacity

    - up to $7500

    —> Example: If a qualifying vehicle has at least 7 kilowatt hours of battery capacity, the minimum credit that can be received for it is $3751 (2500+3*417)

    For vehicles placed in service Apr 18, 2023 and after:

    - $3750 if vehicle meets the critical minerals requirement only

    - $3750 if vehicle meets the battery components requirement only

    - $7500 if vehicle meets both

    —> vehicle not meeting either requirement is not eligible for a credit

    The credit is nonrefundable, so you can't get back more on the credit than you owe in taxes. You can't apply any excess credit to future tax years.

  • File form 8936 here alongside your tax return. Include the VIN (vehicle ID number) on this form.

  • This tax credit is for vehicles placed in service between 2023-2032

  • Eligible for Direct Pay?

    No, as this tax credit is only for individuals.

    Transferable?

    Yes, this starts in 2024 and only transferable to dealer during point of sale.

    Stackable?

    No, you cannot claim both the 30D and 45W credit

  • Critical Minerals Requirement: "vehicle must contain a threshold percentage of critical minerals extracted or processed in the United States or in a country with which the United States has a free trade agreement, or recycled in North America"

Credit for Previously-Owned Clean Vehicles

Credit for Qualified Commercial Clean Vehicles

This is a tax credit that is available to individual consumers purchasing a previously-owned clean vehicle.

IRA Section 13402. Tax Code Section 25E.

  • You qualify for a used clean vehicle tax credit if you buy a qualified EV or FCV from a licensed dealer for $25,000 or less after Jan 1, 2023. This credit is equal to 30% of the sale price and goes up to a maximum credit for $4,000.

    To qualify, you must:

    - be an individual that bought the vehicle for use and not resale

    - not be the original owner of the car

    - not be claimed as a dependent on another person’s tax return

    - not have claimed another used clean vehicle credit in the three years before the purchase date

    - your modified adjusted gross income (either of the current or previous year, whichever is less) may not exceed:

    —> $150,000 for married couples filing jointly

    —> $112,500 for household heads

    —> $75,000 for individual filers

    For the vehicle to qualify, it must:

    - have a sale price of $25,000 or less

    - have a model year of at least two years earlier than the calendar year when you buy it

    - not have already been transferred after Aug 16, 2022 to a qualified buyer

    - have a gross vehicle weight rating of less than 14,000 pounds

    - be an eligible FCV or plug-in EV with a battery capacity of at least 7 kilowatt hours

    - be for use primarily in the US

    For the sale to qualify:

    - the vehicle must be bought from the dealer

    - the seller reports required info to you at time of sale and to IRS (seller is required to report your name and taxpayer ID number to IRS for your eligibility to claim the credit)

  • The credit equals 30% of the sale price up to a maximum credit of $4,000.

    The credit is nonrefundable, so you can't get back more on the credit than you owe in taxes. You can't apply any excess credit to future tax years.

  • File form 8936 here alongside your tax return for the year you took possession of the vehicle to claim the used clean vehicle credit. Include the VIN (vehicle ID number) on this form.

  • This tax credit is for vehicles placed in service between 2023-2032

  • Eligible for Direct Pay?

    No, as this tax credit is only for individuals.

    Transferable?

    Yes, this starts in 2024 and only transferable to dealer during point of sale.

    Stackable?

    No rules exist for stackability as of early July 2023

  • Definition of a dealer: person licensed to sell motor vehicles in a state, District of Columbia, Puerto Rico Commonwealth, any territory/possession of the US, Indian tribal government, or an Alaska Native Corporation

    Required Info for Seller to Report: Dealer's name and taxpayer ID number, Buyer's name and taxpayer ID number, Sale date and sale price, Maximum credit allowable under IRC 25E, Vehicle identification number (VIN) -- unless the vehicle is not assigned one, Battery capacity

This is a tax credit for purchasers of qualified commercial clean vehicles for commercial use or lease.

IRA Section 13403. Tax Code Section 45W.

  • Must be a business or tax-exempt organization to qualify for this credit.

    For the vehicle to qualify, it must:

    - be subject to a depreciation allowance (with exception for vehicles placed in service by tax-exempt organizations and not subject to a lease)

    - be made by a qualified manufacturer

    - be for use in the business/tax-exempt organization, not for resale

    - be for use primarily in the US

    - not have been allowed a credit under the other sections of 30D or 45W

    - treated as a motor vehicle and manufactured for use on public roads OR mobile machinery

    - be a plug-in EV that mainly uses an electric motor (with battery capacity of at least 7 kilowatt hours in gross vehicle weight rating (GVWR) is less than 14,000 pounds or at least 15 kilowatt hours if the GVWR is more than 14,000 pounds) OR a fuel cell motor vehicle that satisfies IRC 30B(b)(3)(A) and (B) -- found in extra info section

  • The credit equals the lesser of either:

    —> 15% of your basis in the vehicle (30% if the vehicle is not powered by gas or diesel)

    —> the incremental vehicle cost

    **The maximum credit is $7500 for qualified vehicles with GVWRs of under 14,000 pounds and $40,000 for all other vehicles. There is no limit on the number of credits your business can claim. For businesses, the credits are nonrefundable, so you can’t get back more on the credit than you own in taxes. A 45W credit can be carried over as a general business credit.

  • The form to be filed to receive the benefits of this credit has not been released yet but will appear here.

  • This tax credit is for vehicles placed in service after Jan 1, 2023 and acquired before Jan 1, 2033.

  • Eligible for Direct Pay?

    Yes, for tax-exempt organizations (like nonprofits), states, political subdivisions, Indian Tribal governments

    Transferable?

    No

    Stackable?

    No, you cannot claim both the 30D and 45W credit

  • Qualified Manufacturer: any manufacturer which enters into a written agreement with the Secretary and agrees to make periodic written reports to the Secretary providing vehicle identification numbers and such other information related to each vehicle manufactured

    Incremental Vehicle Cost: The incremental cost of a clean vehicle is the excess of the purchase price of such vehicle over the price of a comparable vehicle. Direct comparisons found here.

    IRC 30B(b)(3)(A) and (B): motor vehicle-

    (A) which is propelled by power derived from 1 or more cells which convert chemical energy directly into electricity by combining oxygen with hydrogen fuel which is stored on board the vehicle in any form and may or may not require reformation prior to use,

    (B) which, in the case of a passenger automobile or light truck, has received on or after the date of the enactment of this section a certificate that such vehicle meets or exceeds the Bin 5 Tier II emission level established in regulations prescribed by the EPA under section 202(i) of the Clean Air Act for that make and model year vehicle

Alternative Fuel Vehicle Refueling Property Credit

This is a tax credit for alternative fuel vehicle refueling and charging property in low-income and rural areas for consumers and businesses.

IRA Section 13404. Tax Code Section 30C.

  • This credit is available to businesses and individuals that place qualified refueling property into service during the tax year.

    To qualify:

    - refueling property must be used to store or dispense clean-burning fuel

    - the refueling property must be placed in service during the tax year

    - the original use of the refueling property began with the taxpayer

    - the refueling property is primarily used within the US

    - if the refueling property is not a business or investment use property, it must be installed on property used as a main home

    Qualified Refueling Property may be but are not limited to:

    - charging stations for 2 and 3 wheeled vehicles that are for use on public roads

    - bidirectional charging equipment (vehicle to grid)

    **Qualifying refueling property is limited to property placed in service within low-income communities or non-urban census tracts

  • - For qualified refueling property subject to depreciation, the credit is: 6% with a max credit of $100,000 for each single item of property

    - For businesses meeting prevailing wage and apprenticeship requirements, the credit they are eligible for is: 30% credit with a max credit of $100,000

    - For qualifying property not subject to depreciation, the credit is: 30% of the cost with a max amount of $1000 per item

    - For property (including personal property) placed in service before Jan 1, 2023, the credit is: 30% of the cost of qualified refueled property with max total credit of $30,000 for depreciable property and $1000 for all other property.

  • File form 8911 here alongside your tax return.

    Patnerships and S Corporations need to fill out form 8911 as well. All other taxpayers are not required to complete or file the form if their only source for this credit is a partnership or S corporation. Instead, they can report this credit directly on line 1s of Part III of form 3800, found here.

    Developments for this credit are still being released, more information can be found here.

  • This tax credit is available between Jan 1, 2023 through Dec 31, 2032

  • Eligible for Direct Pay?

    Yes, for tax-exempt organizations (like nonprofits), states, political subdivisions, Indian Tribal governments

    Transferable?

    Yes, for property used in business or trade

    Stackable?

    No rules currently exist for this

  • Prevailing Wage: Taxpayers wanting to take advantage of tax benefits must ensure that all laborers and mechanics are paid the applicable prevailing wage (including fringe benefits) for all hours performing construction (and in some cases alteration or repair) on the site of the work of a qualified facility. A prevailing wage is the combination of the basic hourly wage rate and any fringe benefits rate, paid to workers in a specific classification of laborer or mechanic in the area where construction, alteration, or repair is performed. For purposes of showing compliance with the IRA’s prevailing wage provisions, the taxpayer must maintain records that are sufficient to establish that the taxpayer and the taxpayer’s contractor and subcontractor paid wages not less than such prevailing wage rates

Clean Heavy-Duty Vehicle Program

Section 60101. As part of the Inflation Reduction Act, the EPA has set aside and will be distributing $1 billion in funding as grants and rebates to eligible recipients to replace existing heavy-duty vehicles with cleaner, zero-emission vehicles. This program also supports zero-emission vehicle infrastructure, workforce development and training, planning and technical activities. The grants, rebates, and credits that are part of this program are still unclear and may include some of those discussed above; more information about this program can be found below.

All information compiled & gathered from the IRS website and the Inflation Reduction Act Guidebook released as “Building a Clean Energy Economy: A Guidebook to the Inflation Reduction Act’s Investments in Clean Energy and Climate Action, Version 2” as created by cleanenergy.gov & the White House.