The federal tax credit can also be claimed by buyers of certified pre-owned electric vehicles, provided they meet the eligibility criteria. Last August, the US government passed the Inflation Reduction Act (IRA), which ushered in new guidelines and eliminated some old ones. One of the changes was the reintroduction of the incentive for car manufacturers such as Tesla and General Motors. Both car manufacturers were previously exempt from the tax credit when they had passed 200,000 deliveries.
The IRA offers up to $4,000 in tax credits for used electric models, provided they meet certain requirements. The qualifying electric cars include Audi e-tron (2019, 2021 and 2022), Audi e-tron GT (2022, 2023), Audi e-tron S standard and sportsback models (2022), Audi e-tron Sportback (2022) , 2021 and 2022), Audi Q4 e-tron Quattro standard and Sportback trim (2022), Mini Cooper Electric (2020, 2021), Ford Mustang Mach-E (2021), Hyundai Kona Electric (2019, 2022, 2021), BMW i3 sedan (2013 to 2021), Nissan Leaf, Toyota RAV4 EV (2012 to 2014) and Volkswagen ID.4. Interested buyers can visit IRS website to find eligible plug-in and hybrid models. More models are expected to be added soon.
Qualification criteria for used electric cars
While new electric cars are in high demand, certified pre-owned models are also worth the interest given their eligibility for a tax credit. It is recommended that prospective buyers discuss the purchase with a qualified tax professional to gain a clear understanding of how this works. The IRS also provides a comprehensive list of guidelines that drivers must adhere to before claiming the credit. To qualify, applicants must have acquired the EVs for personal use only. In addition, they must not be the original owner of the vehicle or have applied for and received tax credits within the past three years.
Buyer’s modified adjusted gross income (AGI) should not exceed $75,000 for individuals, $112,500 for heads of household, and $150,000 for joint filers or survivors. The IRS allows filers to use either the AGI for the year the EV was delivered or the previous year. Used electric cars must also meet certain prerequisites to guarantee eligibility. They must be purchased for $25,000 or less, driven primarily on US soil, acquired from an approved dealer, have a gross vehicle weight of less than 14,000 lbs, and have a model year two years prior to the calendar year they were purchased.
The IRS adds that the sale becomes eligible when the dealer shares the necessary information with the buyer and the agency. To claim the credit for used clean vehicles, Form 8936, also known as the Qualified Plug-in Electric Drive Motor Vehicle Credit (including qualified two-wheeled plug-in electric vehicles and new clean vehicles), must be submitted with the tax return for the year in as the vehicle was delivered. When applying, drivers must include EV‘s WINE.
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