Thinking about buying an EV for 2023 for your business or personal use? The federal tax credit is back on the table for Tesla and other manufacturers, but now with more strings attached.
With gas prices on Long Island being among the highest in the nation and expanded availability of new models, more and more people are jumping on the electric vehicle bandwagon. While EVs are not suitable for everyone’s needs, they can provide significant savings in the form of fuel and maintenance costs. Further, the tax incentives available can help offset the incremental cost of investing in an EV compared to their traditional gasoline-powered counterparts.
If you are seriously considering buying an electric vehicle, you are likely familiar with the $7,500 federal tax credit, whether you heard it from a salesperson at the dealer or from seeing it plastered all over their websites and marketing materials. The credit is a key negotiating point from the dealer’s perspective and can significantly impact your total cost of ownership, so it is crucial to understand how the credit works, and whether you can even qualify for it – before you buy.
You may have heard that Teslas stopped qualifying for the credit. However, thanks to the Inflation Reduction Act, there are several models that do qualify again - starting January 1, 2023. In true US tax law fashion, the answer to whether you can claim the credit is that it depends.
The Clean Vehicle Credit for EVs delivered starting January 1, 2023 is no longer subject to a cap for each manufacturer, which previously phased out popular models from Tesla and Chevrolet. Under the new tax rule, there are now just two primary limitations.
Businesses also qualify for the Commercial Clean Vehicle credit, and there is no limit on the number of credits your business can claim. This can mean some significant tax savings. Similar to individuals, the maximum credit for vehicles with a GVWR under 14,000 pounds is $7,500, but for the heavyweights above 14,000 pounds there is a maximum credit of $40,000.
If you operate as a sole proprietor, s-corporation, or partnership, the business tax credits will flow through to each owner’s personal tax return and can offset any tax on the business’s income.
The IRS has a helpful page where you can check the latest qualifying EVs under the new tax rules applicable to any cars delivered after January 1, 2023.
If you are not in the market for a new EV, the good news is that you may also be eligible for the purchase of a used EV, which is 30% percent of the sale price up to a maximum credit of $4,000. The income limitations are lower than those for new EVs, but this could be a great option for individuals in the market for a used car.
Adjusted Gross Income Limitations:
There is more good news! Under the new tax law a business that installs an EV charger can still benefit from a tax credit of up to 30% of the total cost of equipment and installation, up to a max of $100,000. Individuals can claim a maximum credit of $1,000. This can cover the costs of the charging unit itself, but also any related installation costs for the charger.
If you are an individual or business in the New York metro area looking for an electric vehicle and want to maximize your tax benefits, you should be sure to have proper tax guidance. At BSB Accountants and Advisors, we have helped many of our clients secure tax incentives like these and others to help grow their bottom line. We serve clients in Hauppauge, Long Island, and the greater New York area. Feel free to reach out to us today and see how we might be able to help you. We hope to see you on the HOV lane of the Long Island Expressway.