Individuals will find it easier and faster to claim tax credits of as much as $7,500 for new electric vehicle purchases in 2024. However, fewer cars qualify for the credit this year due to more stringent requirements concerning the manufacturing and assembly of batteries and other vehicle components.
The clean vehicle tax credit, introduced by the Inflation Reduction Act (IRA), offers a federal income tax credit of up to $7,500 for purchasing new electric, plug-in hybrid and fuel cell electric vehicles purchased in 2023 or later. A separate credit of up to $4,000 exists for used vehicle purchases.
Qualifying for the tax credit is based on several factors. For example, eligible taxpayers must have modified adjusted gross income (MAGI) under $150,000 (or $300,000 for married couples filing joint tax returns). The vehicles’ manufacturer suggested retail prices (MSRPs) must be below $55,000 for sedans or under $80,000 for vans, SUVs and pickup trucks, and their final assembly must occur in North America (i.e., the U.S., Canada or Mexico). What does change in 2024 and all subsequent years are the required mineral and battery sourcing requirements.
To qualify for a credit of $3,750, at least 50 percent of the battery’s critical minerals must be extracted or processed in the United States or a U.S. free-trade agreement partner in 2024. To qualify for the other half of the clean vehicle tax credit, at least 60 percent of the vehicle’s battery components must be manufactured or assembled in North America. Automakers will make these details about qualifying vehicles available to dealerships and the IRS.
Also new in 2024 is taxpayers’ ability to transfer eligible credits to the car dealership at the point of sale and use it as an immediate rebate rather than waiting to claim the credit on their tax returns the following year. By doing so, buyers can reduce a vehicle’s MSRP by the credit amount and lower their monthly payments when they finance the purchase.
About the Author: Scott Montgomery is a director and financial planner with Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. He can be reached at the firm’s Ft. Lauderdale, Fla. office at (954) 712-8888 or info@provwealth.com.
Provenance Wealth Advisors (PWA), 200 E. Las Olas Blvd., 19th Floor, Ft. Lauderdale, Fla. 33301 (954) 712-8888.
Scott Montgomery is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
This material is being provided for information purposes only and is not a complete description or a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult your financial advisor about your individual situation.
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Posted on March 12, 2024