Inflation Reduction Act Provisions for Vehicles

VEHICLES
TAX PROVISIONS Clean Vehicle Credit
DESCRIPTION Provides a tax credit for purchasers of clean vehicles.
ELIGIBLE RECIPIENTS The tax credit is not available for consumers who have adjusted gross incomes for the current or preceding year above $300,000 (couples), $225,000 (heads of household), $150,000 (singles). Not inflation adjusted.
BASE CREDIT AMOUNT $0
BONUS CREDIT AMOUNT $3,750 credit for vehicles meeting critical minerals requirement. The 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. Additional $3,750 credit for vehicles meeting the requirement that a threshold percentage of battery components be manufactured or assembled in North America. Vehicles must meet other requirements, including final assembly in North America and MSRP limits (generally $55,000; for vans, SUVs, and pickups $80,000). 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.
U.S. CODE 26 U.S. Code 30D
IRA SECTION 13401
FUNDING MECHANISM Tax credit for consumers
NEW OR MODIFIED? Modified and extended. Credit extended with new rules pertaining to final assembly in the United States, critical minerals/battery components, and foreign entities of concern. Per manufacturer limit is lifted.
PERIOD OF AVAILABILITY Generally, vehicles placed in service in 2023-2032. Some of the 30D rules have differing timeframes.
DIRECT PAY No
TRANSFERABLE Yes. Starting in 2024, transferable only to the dealer at point of sale under section 30D(g) but not under section 6418.
STACKABLE Cannot claim both 30D credit and 45W credit.
TRIBAL ELIGIBILITY Yes, point of sale transfer to registered dealers (definition of dealer includes persons licensed by Indian Tribal governments to engage in the sale of vehicles)
RELEVANT LINKS Clean Vehicle Credit | (irs.gov)
Tax Incentives (fueleconomy.gov)

 

VEHICLES
TAX PROVISIONS Credit for Previously-Owned Clean Vehicles
DESCRIPTION To provide a tax credit for purchasers of pre-owned clean vehicles
ELIGIBLE RECIPIENTS Tax credit is not available for consumers who have adjusted gross incomes for the current or preceding year above $150,000 (couples), $112,500 (heads of household), $75,000 (singles). Individuals can claim only once per three years. Vehicles must be sold by a dealer; the sale price must be $25,000 or less; and it can only be claimed once per vehicle.
BASE CREDIT AMOUNT The lesser of $4,000 or 30% of sale price
BONUS CREDIT AMOUNT None
U.S. CODE 26 U.S. Code 25E
IRA SECTION 13402
FUNDING MECHANISM Tax credit for consumers
NEW OR MODIFIED? New
PERIOD OF AVAILABILITY Generally, vehicles placed in service in 2023-2032.
DIRECT PAY No
TRANSFERABLE Yes. Starting in 2024, transferable only to the dealer at point of sale under section 25E(f) but not under section 6418.
STACKABLE No rules
TRIBAL ELIGIBILITY Yes, point of sale transfer to registered dealers (definition of dealer includes persons licensed by Indian Tribal governments to engage in the sale of vehicles)
RELEVANT LINKS Credit for Previously-Owned Clean Vehicles | (irs.gov)

 

 

VEHICLES
TAX PROVISIONS Credit for Qualified Commercial Clean Vehicles
DESCRIPTION Provides a tax credit for purchasers of qualified commercial clean vehicles
ELIGIBLE RECIPIENTS Businesses that acquire motor vehicles or mobile machinery for use or lease; tax-exempt entities that acquire them for use.
BASE CREDIT AMOUNT The amount of the credit is the lesser of (a) 15% of the vehicle's basis (i.e. its cost to the purchaser) or 30% for vehicles without internal combustion engines, or (b) the amount the purchase price exceeds the price of a comparable internal combustion vehicle. The credit is capped at $7,500 for vehicles < 14,000 lbs. and $40,000 for all other clean vehicles.
BONUS CREDIT AMOUNT None
U.S. CODE 26 U.S. Code 45W
IRA SECTION 13403
FUNDING MECHANISM Tax credit for commercial use or lease
NEW OR MODIFIED? New
PERIOD OF AVAILABILITY Vehicles placed in service after 1/1/23 and acquired before 1/1/33.
DIRECT PAY Yes, for states, political subdivisions, tax-exempt organizations (other than co-ops described in section 521), and Indian Tribal governments.
TRANSFERABLE No
STACKABLE Cannot claim both the 30D credit and 45W credit.
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Credit for Qualified Commercial Clean Vehicles | (irs.gov)

 

 

VEHICLES
TAX PROVISIONS Alternative Fuel Vehicle Refueling Property Credit
DESCRIPTION Provides a tax credit for alternative fuel vehicle refueling and charging property in low-income and rural areas. Alternative fuels include electricity, ethanol, natural gas, hydrogen, biodiesel, and others.
ELIGIBLE RECIPIENTS The qualified alternative fuel vehicle refueling property must be for clean-burning fuels, as defined in the statute, and must be located in low-income or rural areas.
BASE CREDIT AMOUNT 6% of the cost for businesses, limited to a $100,000 credit per item of property for businesses. 30% for individuals, limited to $1,000.
BONUS CREDIT AMOUNT Businesses can claim a 30% credit for projects meeting prevailing wage and apprenticeship requirements.
U.S. CODE 26 U.S. Code 30C
IRA SECTION 13404
FUNDING MECHANISM Tax credit for consumers and businesses.
NEW OR MODIFIED? Extended and modified to include prevailing wage and registered apprenticeship requirements for businesses claiming the credit. Adds bidirectional charging equipment, charging equipment for 2- and 3-wheel electric vehicles. Limited to low-income and non-urban areas.
PERIOD OF AVAILABILITY January 1, 2023-December 31, 2032
DIRECT PAY Yes, for tax-exempt organizations; states; political subdivisions; the Tennessee Valley Authority; Indian Tribal governments; Alaska Native Corporations; and rural electricity co-ops.
TRANSFERABLE Yes, for property used in a trade or business.
STACKABLE No rules
TRIBAL ELIGIBILITY Yes
RELEVANT LINKS Inflation Reduction Act of 2022 | (irs.gov)