The IRS has recently made significant changes to the Internal Revenue Code (IRC) section 30D, which offers federal tax credits to individuals who purchase electric vehicles (EVs) and plug-in hybrid vehicles. These tax credits are aimed at encouraging people to invest in energy-efficient transportation options.
One of the key updates to the regulations under IRC section 30D is the broader definition of eligible vehicles. The definition now includes “new clean vehicles” that meet specific criteria, such as having a significant electric propulsion component and meeting assembly requirements in North America.
In addition, the amendments have updated the requirements for critical minerals and battery components. The maximum tax credit remains at ,500 per vehicle but is now split into two equal parts, with one part dependent on meeting critical minerals requirements and the other on meeting battery components requirements.
Specific rules have been introduced for vehicles placed in service after Dec. 31, 2022, including limitations on the number of claims per Vehicle Identification Number (VIN) and income restrictions for high-income taxpayers. Price caps have also been set to prevent the tax credit from subsidizing luxury vehicles.
Furthermore, the ability to transfer the clean vehicle credit to dealers has been introduced, giving taxpayers the option to apply the credit directly to the dealer at the point of sale.
Notably, the phaseout for the section 30D tax credit has been eliminated, meaning the tax credit does not decrease regardless of how many vehicles a manufacturer sells. The new legislation also provides clear applicability dates for the various amendments and sets a firm end date for the clean vehicle tax credit after Dec. 31, 2032.
For more information on these changes, individuals can visit the IRS website. To learn how Baker Tilly can help organizations understand and maximize the benefits of the IRC section 30D tax credits and the Inflation Reduction Act, they can reach out to Baker Tilly for assistance.
