Plug-In Electric Drive Vehicle Federal Tax Credit (IRC 30D)

Description

Internal Revenue Code Section 30D provides a credit for Qualified Plug-In Electric Drive Motor Vehicles including passenger vehicles and light trucks. The credit encourages the adoption of environmentally friendly vehicles.

Eligibility

The credit applies to vehicles acquired after December 31, 2009, for personal use or lease within the United States. Additionally, the original use of the vehicle must commence with the taxpayer and the vehicle must be used in the United States. For purposes of the 30D credit, a vehicle is not considered acquired until title to the vehicle passes to the taxpayer under state law. Leased electric vehicles (EVs) may entitle the manufacturer to the credit, influencing lease costs. The credit begins to phase out for a manufacturer’s vehicles after a sales threshold is reached.

Credits for new clean vehicles purchased in 2023 or after:

If a plug-in EV or fuel cell vehicle is placed in service in 2023 or later, a new clean vehicle tax credit, also governed by IRC § 30D, may be available. Sellers must provide qualification information at the time of sale, and online registration is mandatory for IRS eligibility. Vehicles must have a battery capacity of at least 7 kilowatt hours, weigh less than 14,000 pounds, be made by a qualified manufacturer, undergo final assembly in North America, and meet new requirements after April 18, 2023.

How it Works

The credit is equal to $2,500 plus, for vehicles that draw propulsion energy from a battery with at least 5 kilowatt hours of capacity, an additional $417, as well as an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The EV credit is nonrefundable and will only offset the claimant’s tax liability for a given tax year, meaning the credit cannot exceed the amount the claimant owes in taxes.

For businesses, the tax credit attributable to depreciable property (vehicles used for business or investment purposes) is treated as part of the general business credit. The general business credit can be carried back one year or carried forward for up to 20 years. Any credit not attributable to depreciable property is treated as a personal credit.

The credit begins to phase out for a manufacturer’s vehicles when at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States. Qualifying vehicles manufactured by that manufacturer are eligible for 50 percent of the credit if acquired in the first two quarters of the phase-out period and 25 percent of the credit if acquired in the third or fourth quarter of the phase-out period.  Vehicles manufactured by that manufacturer are not eligible for a credit if acquired after the phase-out period. At present, Tesla and General Motors are the only two EV manufacturers to hit the sales threshold and no credit will be available for Tesla vehicles acquired after December 31, 2019 and General Motors vehicles acquired after March 31, 2020.

A list of qualified make and models, and their applicable credit amounts are available here.

Credits for new clean vehicles purchased in 2023 or after:

Individuals and businesses may qualify for a credit up to $7,500 if they purchase a new, qualified plug-in EV or FCV for personal use in the United States. Modified AGI limits apply, and the credit is nonrefundable. The credit amount varies based on the vehicle’s battery capacity and when it is placed in service. After April 17, 2023, vehicles must meet new critical mineral and battery component requirements for the credit.

Click here to see if a vehicle is eligible for the new clean vehicle credit.

How to Apply

The tax credit is claimed when the taxpayer files their federal tax return. The specific IRS form for the credit is the Qualified Plug-In Electric Drive Motor Vehicle Credit Form 8936.

When filling out Form 8936, taxpayers can rely on the domestic manufacturer’s (or, in the case of a foreign manufacturer, its domestic distributor’s) certification that a particular make, model, and year of the vehicle qualifies as a plug-in electric drive motor vehicle under section 30D, and certification of the amount of the credit allowable with respect to the vehicle.

Instructions for filling out Form 8936 are also available.

For more information, refer to the official IRS Plug-In Electric Drive Vehicle Credit webpage.

Contact Information

Internal Revenue Service (IRS),
1111 Constitution Avenue, N.W.,
Washington, D.C. 20224
(800) 829-1040