Tax credits for electric vehicles (EVs) were expanded and thoroughly revamped when Congress enacted the Inflation Reduction Act back in 2022. The new tax credit regime became effective in 2023.
How has it been working out? Not quite as expected.
As a result of the new law, there are four ways you can benefit from a federal tax credit for an EV:
1.
Purchase an EV and claim the clean vehicle credit.
2.
Lease an EV and benefit from an EV dealer discount.
3.
Purchase a used EV that qualifies for the previously owned clean vehicle credit.
4.
Purchase an EV for business use and claim the commercial clean vehicle credit.
You can claim only one of the credits per vehicle (you don’t claim the credit yourself if you lease—the dealer gets it and can pass all or some of it to you).
Which method do you think is the most popular? If you said purchasing an EV and claiming the clean vehicle credit, you’d be wrong. In fact, leasing an EV is the most popular way to benefit from an EV credit.
1. Clean Vehicle Credit
This credit may be claimed whether a qualifying EV is used for personal driving, business driving, or both. The maximum credit is $7,500. The credit is available for new EVs assembled in North America that have a gross vehicle weight rating (GVWR) of less than 14,000 pounds. They may be pure EVs or plug-in hybrid EVs (PHEVs).
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