The Tax Blotter – Oct. 27, 2022

The Inflation Reduction Act (IRA) generally enhances the up-to-$7,500 tax credit for electric vehicles (EVs) and plug-in hybrids, but the news isn’t good for all taxpayers.

Sticker shock. A taxpayer won’t qualify for the EV credit in 2023 if their income is too high or the vehicle costs too much. First, you can’t claim the credit if you’re a single filer with a modified adjusted gross income (MAGI) of $150,000 or under or $300,000 if you file jointly. Second, you don’t qualify if the vehicle is a passenger car costing more than $55,000 or a van, SUV or pickup truck costing more than $80,000. Watch out for these dollar limits.

Resale value. Previously, the EV credit was only available to purchasers of new vehicles. The IRA allows a credit of up to $4,000 for buying a used vehicle, but you must certain requirements. Notably, the credit is only available to single filers with a MAGI no more than $75,000 or $150,000 for joint filers and the vehicle can’t cost more than $25,000. These rules take effect in 2023, so you might wait until next year if you’re in the market for a used EV.