The clean vehicle tax credit is a nonrefundable federal tax credit that can only be used against federal income taxes. In this example, we have a taxpayer who owes both federal income taxes and federal selfemployment taxes, but he is only able to offset federal income taxes with the vehicle tax credit. The taxpayer purchases a 2023 Chrysler Pacifica, which qualifies for a $7,500 EV tax credit. However, the amount of credit that is ultimately used is limited to the federal income tax liability.

In order to qualify for the credit, the taxpayer's modified AGI must be at or below the relevant AGI thresholds. In a case where 2023 income is above the threshold, the taxpayer can elect to use their lower 2022 income to qualify for the credit

The IRS Form 8936 is used to claim an electric vehicle tax credit for qualified vehicles. In order to claim the credit, the vehicle must generally meet the following requirements for 2023:

1. The Vehicle must be new (exceptions apply for qualified used vehicles).
2. The vehicle must be propelled by an electric motor that draws electricity from a battery, and the battery is recharged by an external power source.
3. The gross vehicle weight must be less than 14,000 pounds.
4. The vehicle's final assembly occurred in North America.
5. MSRP is not more than $50,000 ($80k applies to vans & SUVs).

The available tax credit is a maximum of $7,500 per vehicle. In order to get the full $7,500, the vehicle must meet both the critical mineral requirement and battery component requirement. If the vehicle only meets one of the tests, it is only eligible for a $3,750 tax credit.

If you have doubts about whether the vehicle qualifies, you can check the following websites to look up the year, make & model.

FuelEconomy: https://fueleconomy.gov/feg/tax2023.s...
IRS Website: https://www.irs.gov/creditsdeduction...

For more videos on energy tax credits:
   • Energy Efficient Credits and Incentiv...  

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