Topic C — Frequently Asked Questions About When The New Requirements Apply To The New Clean Vehicle Credit

Updated FAQs were released to the public in Fact Sheet 2023-22PDF, Oct. 6, 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. On the day after the Inflation Reduction Act of 2022 became law (August 16, 2022), did any requirements for taxpayers or vehicles to qualify for the credit for new clean vehicles change? (added December 29, 2022)

A1. Yes, after August 16, 2022, a new clean vehicle must have had its final assembly in North America to be eligible for the credit. There is a transition rule for vehicles purchased before August 16, 2022. Additional changes begin January 1, 2023.

Q2. What additional changes to the credit apply for vehicles placed in service on or after January 1, 2023? (updated October 6, 2023)

A2. The most significant changes to the credit for vehicles delivered on or after January 1, 2023, include:

• The minimum battery capacity is increased to 7 kilowatt hours
• Vehicles must be made by a qualified manufacturer (see Topic A, FAQ 9 for more detail)
• MSRP limitations apply, based on the type of vehicle (see Topic B, FAQs 3 and 6 for more detail)
• Income limits apply to taxpayers (see Topic B, FAQs 1 and 2 for more detail)
• The taxpayer must report the vehicle identification number (VIN) of the vehicle on the taxpayer’s income tax return
• Sellers must provide reports to the taxpayer and the IRS regarding the sale of the vehicle
• Beginning in 2024, the taxpayer may elect to transfer the new clean vehicle credit to the registered dealer

Q3. Does the "phase-out period" that limited or eliminated the credit for vehicles sold by certain manufacturers that had sold more than 200,000 vehicles still apply for vehicles sold after January 1, 2023? (added December 29, 2022)

A3. No, for vehicles sold on or after January 1, 2023, the prior sales volume limitations no longer apply. The prior sales volume limitations apply to vehicles sold before January 1, 2023.

Q4. When do the new critical mineral and battery components requirements apply? (updated March 31, 2023)

A4. April 18, 2023.  The critical mineral and battery components requirements of the new clean vehicle credit  apply to vehicles placed in service on or after April 18, 2023, the day after the applicable Notice of Proposed Rulemaking is issued in the Federal Register. 

Vehicles ordered or purchased prior to but placed in service on or after April 18, 2023 will be subject to the critical mineral and battery component requirements. 

Q5. If I order a new clean vehicle in one year and don't receive it until a subsequent year, when do I claim the credit? (updated March 31, 2023)

A5. For vehicles purchased on or after August 16, 2022, the new clean vehicle credit is claimed in the tax year that the vehicle is placed in service, meaning the date the taxpayer takes delivery of the vehicle. For vehicles that are placed in service after they are ordered, a vehicle's eligibility for the new clean vehicle credit may change as certain eligibility criteria vary based on when the taxpayer takes delivery of the vehicle. For more information, see FAQ 7.

However, if you entered into a written binding contract to buy a new clean vehicle after December 31, 2021, and before August 16, 2022, but took possession on or after August 16, 2022, you must claim the credit on a tax return for tax year 2022. Depending on the date the vehicle is delivered, you can claim the credit on your original, superseding, or amended 2022 tax return.  For more information, see FAQ 8.

Q6: If I order (or purchase) an eligible new clean vehicle on or after August 16, 2022, but don't take delivery until after Treasury issues proposed guidance on the critical mineral and battery component requirements, will my vehicle still be eligible? (updated March 31, 2023)

A6: The vehicle may or may not be eligible depending on whether it meets the critical mineral and battery component requirements.  A vehicle's eligibility for the new clean vehicle credit is generally based on the rules that apply as of the date a vehicle is placed in service, meaning the date the taxpayer takes delivery of the vehicle.  New clean vehicles placed in service on or after April 18, 2023 are subject to the critical mineral and battery component requirements even if the vehicle was ordered or purchased before April 18, 2023.  

For vehicles purchased prior to August 16, 2022, see Credits for New Electric Vehicles Purchased in 2022 or Before.

Q7: If I purchase a new clean vehicle in 2022 on or after August 16, 2022, but take delivery of the vehicle in 2023, do the income and MSRP limitations apply? (updated February 3, 2023)

A7: Yes, the income and MSRP limitations apply to any vehicle that is placed in service (delivered to the taxpayer) in 2023.

Q8: If I purchased or entered into a written binding contract to purchase my new clean vehicle after December 31, 2021, and before August 16, 2022, and placed it in service after December 31, 2022, what requirements apply and what tax year’s return can I claim the new clean vehicle credit on? (added March 31, 2023)

A8:  If you purchased or entered into a written binding contract to purchase a new clean vehicle after December 31, 2021, and before August 16, 2022, but took possession on or after August 16, 2022, you may claim the credit based on the requirements for the credit that applied on August 15, 2022, the day before the IRA was enacted.  To do so, you are required to claim the credit on a tax return for tax year 2022.  Depending on the date the vehicle is placed in service, you may claim the credit on an original, superseding, or amended return for tax year 2022.

Taxpayers may not claim the credit before they take possession of the vehicle. While taxpayers should file when they are ready, they should avoid filing prematurely. If you have not received the vehicle before your original tax filing deadline and you have the option, consider applying for an automatic extension of time to file your return. 

If you have not yet filed your tax return for tax year 2022 at the time you take possession of your new clean vehicle, you may claim the credit on your original 2022 tax return.  If you have already filed your tax return for tax year 2022 at the time you take possession of the new clean vehicle, you may file an amended tax return for tax year 2022 and claim the credit.  Generally, taxpayers must file an amended return within 3 years after the date the original return was filed or within two years after the date they paid the tax, whichever is later. 

Q9: If I purchase a new clean vehicle in 2022 that was made by a manufacturer that had already reached the manufacturer sales cap but it is not delivered until 2023, does the manufacturer sales cap still apply? (added December 29, 2022)

A9: Yes, the sales cap of 200,000 vehicles applies to vehicles sold before January 1, 2023. If you purchased a vehicle that is subject to the sales cap, it is not eligible for the credit regardless of when you place it in service.