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Tax

The Tax Blotter – Oct. 27, 2022

The tax blotter is a roundup of recent tax briefs.

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.

Over the limit. Under prior law, credits begin to phase out for vehicles produced by   a manufacturer when the number of vehicles sold for domestic use exceeds 200,000 vehicles. Tesla, Toyota and GM have already exceeded the threshold. The IRA repeals this rule, beginning in 2023, but it still applies for vehicles placed in service in 2022. This could affect your buying decisions at the end of the year.