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 2023-08PDF, March 31, 2023.

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

These FAQs provide detail on how the IRA revises the credit available under § 30D (new clean vehicle credit) for individuals and businesses, and information on the credit available under § 25E (previously-owned clean vehicle credit) for individuals, and the new credit for qualified commercial clean vehicles under § 45W of the Code.

Q1. Could my income level prevent me from taking the new clean vehicle credit? (updated March 31, 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 at or below the threshold in the preceding year or current year based on applicable filing status for that 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 March 31, 2023)

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.

FuelEconomy.gov contains a list of eligible clean vehicles, including fuel cell vehicles, qualified manufacturers have indicated to the IRS meet the requirements to claim the new clean vehicle credit, including the applicable MSRP limitation.

Q4. How will I know what the manufacturer's suggested retail price (MSRP) is for a vehicle? (added December 29, 2022)

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.

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 manufacturer's suggested retail price threshold? (added December 29, 2022)

A5. The credit limitations on the price of the vehicle are based on manufacturer's suggested retail price, not the actual price you paid for the vehicle. See FAQ 3 for how to determine the manufacturer's suggested retail price.

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

A6. The credit limitations on the price of the vehicle are based on manufacturer's suggested retail price (MSRP), not the actual price you paid for the vehicle. See FAQ 3 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 manufacturer's suggested retail price for a vehicle? (updated March 31, 2023)

A7. A vehicle's classification for this purpose relates to the classification describing the vehicle on the 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 "sports 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.

FuelEconomy.gov contains a list of eligible clean vehicles, including fuel cell vehicles, qualified manufacturers have indicated to the IRS meet the requirements to claim the new vehicle credit, including the applicable MSRP limitation.

Q8.  If my vehicle’s classification changed since it was purchased, can I claim the new clean vehicle credit? (updated March 31, 2023)

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 Notice 2023-16PDF issued on February 3, 2023, and incorporated in the proposed 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 tax credit prior to the updated notice 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 March 31, 2023)

A9. A seller must provide the following information on a report to the taxpayer and to the IRS:

• Name and taxpayer identification number of the seller
• 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.

Q10. When must the seller provide the report to the taxpayer? (updated February 3, 2023)

A10. The seller must provide the report to the taxpayer not later than the date the vehicle is purchased. However, taxpayers that did not receive a report from the seller because their vehicle was previously ineligible but their vehicle is now eligible (such as due to a change in the vehicle’s classification and the applicable MSRP limitation) may request and receive a report from the seller after the vehicle’s purchase date.  

For further details see Revenue Procedure 2022-42.

Q11. How will a seller provide these reports to the IRS? (added December 29, 2022)

A11. For vehicle sales occurring in calendar year 2023 and later, sellers must file reports within 15 days after the end of the calendar year, in a format and method that the IRS provides. For further details see Revenue Procedure 2022-42.