Topic B — Frequently asked questions about income and price limitations for the New Clean Vehicle Credit

Updated FAQs were released to the public in Fact Sheet 2024-26 PDF, July 2024.

The Inflation Reduction Act of 2022 (IRA) makes several changes to the tax credit provided in section 30D of the Internal Revenue Code (Code) for qualified plug-in electric drive motor vehicles, including adding fuel cell vehicles to the section 30D tax credit. The IRA also added a new credit for previously owned clean vehicles under section 25E of the Code.

These FAQs provide detail on how the IRA revises the credit available under section 30D (New Clean Vehicle Credit) for individuals and businesses, and information on the credit available under section 25E (Previously Owned Clean Vehicle Credit) for individuals, and the new credit for qualified commercial clean vehicles under section 45W of the Code.

Q1. Could my income level prevent me from taking the New Clean Vehicle Credit? (updated Oct. 6, 2023)

A1. Yes. You may not claim the credit if your modified adjusted gross income (AGI) exceeds certain thresholds. This limitation is based on the lesser of your modified AGI for the year that the new clean vehicle was placed in service or for the preceding year. The relevant modified AGI thresholds are as follows:

• Married filing jointly or filing as a qualifying surviving spouse or a qualifying widow(er) - $300,000
• Head of household - $225,000
• All other taxpayers - $150,000

Your modified AGI is the amount from line 11 of your Form 1040 plus:

• Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income.
• Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa.

If your filing status changes between the preceding year and the current year, you may claim the New Clean Vehicle Credit if your modified AGI is less than or equal to the threshold applicable to your filing status for in the preceding year or current year.

Q2. How do the income thresholds apply to my partnership's purchase and use of a new clean vehicle? (added March 31, 2023)

A2. If a partnership or an S corporation places a new clean vehicle in service and the New Clean Vehicle Credit is claimed by individuals who are direct or indirect partners of that partnership or shareholders of that S corporation, the modified AGI thresholds apply to those partners or shareholders.

Q3. Are there any price limitations on new clean vehicles eligible for the credit? (updated July 26, 2024)

A2. Yes. The manufacturer's suggested retail price (MSRP) for the new clean vehicle may not exceed the following amounts for the following vehicle types:

• Vans - $80,000
• Sport Utility Vehicles - $80,000
• Pickup Trucks - $80,000
• Other - $55,000

If the MSRP exceeds the limitation for that specific vehicle type, that vehicle is not eligible for the New Clean Vehicle Credit.

The Department of Energy hosts a buyer-friendly version of IRS's list of potentially eligible new clean vehicles, including battery electric, plug-in hybrid and fuel cell vehicles, that qualified manufacturers have indicated to the IRS meet the requirements to claim the New Clean Vehicle Credit on FuelEconomy.gov, including the applicable MSRP limitation.

Q4. How will I know what the manufacturer’s suggested retail price (MSRP is for a vehicle? (updated July 26, 2024)

A4. The MSRP will be on the vehicle information label attached to each vehicle on a dealer's premises. The MSRP for this purpose is the base retail price suggested by the manufacturer plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges or optional items added by the dealer, or taxes and fees. In addition, manufacturer/dealer incentives and trade-ins do not affect MSRP. The New Clean Vehicle Credit is not a rebate and does not reduce the MSRP or the purchase price. If transferred, the credit may be used as a down payment.

Q5. Would I still qualify for the New Clean Vehicle Credit if the purchase price, including sales tax, fees, negative equity on a trade, etc., exceeds the MSRP threshold? (added Dec. 29, 2022)

A5. The credit limitations on the price of the vehicle are based on MSRP, not the actual price you paid for the vehicle. See FAQ 4 for how to determine the MSRP.

Q6. If the manufacturer/dealer offers incentives on the purchase, and the total purchase price drops below the MSRP limitation, will the vehicle be eligible for the new clean vehicles credit? (added Dec. 29, 2022)

A6. The credit limitations on the price of the vehicle are based on MSRP, not the actual price you paid for the vehicle. See FAQ 4 for how to determine MSRP.

Q7. How do I know if my vehicle is a pickup truck, van, sport utility vehicle (SUV), or other type of vehicle for purposes of determining the applicable MSRP for a vehicle? (updated July 26, 2024)

A7. A vehicle's classification for this purpose relates to the classification describing the vehicle on the fuel economy label included as part of the window sticker as well as the EPA Size class displayed on FuelEconomy.gov. Vehicles whose class includes "sport utility vehicle," "pickup truck" or "van" on the fuel economy label or on FuelEconomy.gov are considered a sport utility vehicle, pickup truck or van respectively for this purpose, and the $80,000 MSRP limit applies, including for the following vehicle classes:

• Small Sport Utility Vehicle
• Standard Sport Utility Vehicle
• Small Pickup Truck
• Standard Pickup Truck
• Minivan
• Van

If your eligible vehicle is not in one of the classes described in the list above, the $55,000 MSRP limitation applies.

The Department of Energy hosts a buyer-friendly version of IRS's list of eligible clean vehicles, including battery electric, plug-in hybrid and fuel cell vehicles, that qualified manufacturers have indicated to the IRS meet the requirements to claim the New Clean Vehicle Credit on FuelEconomy.gov, including the applicable MSRP limitation.

At the time of sale, buyers are advised to obtain a copy of the seller report submitted by the dealer to the IRS containing the vehicle identification number of the vehicle being purchased, ensure there are no errors, and then confirm with the dealer that the dealer’s submission of the report through IRS Energy Credits Online was successful. IRS Energy Credits Online provides real-time confirmation of a vehicle’s eligibility using VINs provided by qualified manufacturers.

Q8. If my vehicle's classification changed since it was purchased, can I claim the New Clean Vehicle Credit? (updated July 26, 2024)

A8. Eligible taxpayers who placed in service an eligible vehicle on or after January 1, 2023, may claim the credit on their tax return based on the updated vehicle classification definition provided in the final regulations, and the associated MSRP limitation. All vehicles that were classified as an SUV, van, or pickup truck for the purpose of the New Clean Vehicle Credit prior to the issuance of final regulations continue to be subject to the same $80,000 MSRP limitation. Some vehicles that were previously subject to the $55,000 MSRP limitation are now classified as SUVs and therefore get the benefit of the $80,000 MSRP limitation. The vehicles now classified as SUVs for this purpose include, but may not be limited, to the 2023 Cadillac Lyriq, the 2022 and 2023 Ford Mustang Mach-E, certain variants of the 2022 and 2023 Tesla Model Y, certain variants of the 2022 and 2023 Volkswagen ID.4, and the 2022 and 2023 Ford Escape Plug-In Hybrid. In the case where vehicles have been reclassified for the purpose of this credit, taxpayers should obtain a report from the seller, see FAQ 9. Vehicles placed in service on or after April 18, 2023, must also meet the critical minerals and battery sourcing requirements to claim the credit.

Q9. What information does a seller have to provide to a taxpayer purchasing a new clean vehicle to allow the taxpayer to claim the New Clean Vehicle Credit? (updated July 26, 2024)

A9. A seller must provide the following information on a report to the taxpayer and to the IRS. These reports are called “seller reports” or “time of sale reports”:

• Name and taxpayer identification number of the seller.
  • Where the buyer is a grantor trust, the name and taxpayer identification number of the grantor or other deemed owner of the trust should be listed.
  • Where the buyer is a disregarded entity, such as a single member LLC, the name and taxpayer identification number of the taxable owner of the disregarded entity should be listed.
• Name and taxpayer identification number of the taxpayer (only one taxpayer may be listed on the seller report; in the event of multiple owners, only the taxpayer that intends to claim the credit should be listed).
• Vehicle identification number (VIN) of the new clean vehicle.
• Battery capacity of the new clean vehicle.
• Verification that the taxpayer is the original user of the new clean vehicle.
• The date of the sale and the sale price of the vehicle.
• Maximum credit allowable for the new clean vehicle being sold.
• For sales after December 31, 2023, the amount of any transfer credit applied to the purchase.
• A declaration under penalties of perjury from the seller.

For further details see Revenue Procedure 2022-42 and Revenue Procedure 2023-33.

Q10. When must the seller provide the report to the taxpayer? (updated July 26, 2024)

A10. For sales occurring on or after January 1, 2024, the seller must file a report through the IRS Energy Credits Online Portal within three calendar days of the date of sale. The seller must provide the report and confirmation of the submission to the taxpayer purchasing the vehicle within three calendar days of submission. It is recommended that the report be filed upon completion of the sale and provided to the taxpayer prior to the vehicle being placed in service.

For further details see Revenue Procedure 2022-42 and Revenue Procedure 2023-33.

Q11. How will a seller provide these reports to the IRS? (updated April 16, 2024)

A11. For vehicle sales occurring in calendar year 2023, sellers were required to file reports with the IRS by Feb. 15, 2024. For vehicle sales occurring in calendar year 2024 and later, sellers must file reports within 3 days of the time of sale through IRS Energy Credits Online. For further details see Revenue Procedure 2022-42, Revenue Procedure 2023-33 and Revenue Procedure 2024-12.

Q12. The time-of-sale report requires a buyer E-signature. What is an E-signature? (added July 26, 2024)

A12. An E-signature is provided by having the buyer type their name in the signature box.

Q13. What if I need to change a time-of-sale report submitted for a VIN? (added July 26, 2024)

A13. If a second time-of-sale report is needed for a VIN, the first time-of-sale report should be voided within the 48-hour void period prior to submitting the second time-of-sale report for the same VIN. Refer to Publication 5867, Clean Vehicle Dealer and Seller Energy Credits Online Registration User Guide PDF, and contact irs.clean.vehicles.dealer.info@irs.gov with any specific questions. The IRS will provide additional information on IRS Energy Credits Online about returns, cancellations, and updating errors on the seller report outside the 48-hour void period in the coming months.

Q14. Does the time-of-sale report need to be completed for leased vehicles through IRS Energy Credits Online? (added July 26, 2024)

A14. No. In the case of a leased vehicle, the lessor (leasing business) and not the lessee generally is the owner of the vehicle. The only person who can claim a New Clean Vehicle Credit is the owner. If the owner (the leasing business in the case of a leased vehicle) plans to claim a New Clean Vehicle Credit under section 30D, a time-of-sale report is required. However, the credit cannot be transferred to the dealer because the election to transfer credits is not available for new clean vehicle purchases used for business. Leasing businesses may claim the credit as a Commercial Clean Vehicle Credit under section 45W as part of their general business credits. This does not require the seller of the vehicle to submit a time-of-sale report.