Topic E — Frequently asked questions about the income and price limitations for previously owned clean vehicles

Updated FAQs were released to the public in Fact Sheet 2024-26 PDF, July 2024.

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

These FAQs provide detail on how the IRA revises the credit available under section 30D (New Clean Vehicle Credit) for individuals and businesses, and information on the credit available under section 25E (Previously Owned Clean Vehicle Credit) for individuals, and the new credit for qualified commercial clean vehicles under section 45W of the Code.

Q1. Could my income level prevent me from taking the Previously Owned Clean Vehicle Credit? (added Dec. 29, 2022)

A1. Yes. You may not claim the credit if your modified adjusted gross income (AGI) exceeds certain thresholds. This limitation is based on your modified AGI for the year that the previously owned clean vehicle was placed in service or for the preceding year being below the respective modified AGI threshold. The relevant modified AGI thresholds are as follows:

• Married filing jointly or filing as a qualifying surviving spouse or a qualifying widow(er) - $150,000.
• Head of household - $112,500.
• All other filers - $75,000.

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.

Q2. Is there a price limitation that applies in order for previously owned clean vehicles to be eligible for the credit?  (updated July 26, 2024)

A2. If the sale price of a previously owned clean vehicle exceeds $25,000, the vehicle is not eligible for the Previously Owned Clean Vehicle Credit. The sale price of a previously owned clean vehicle means the total price agreed upon by the buyer and seller in a written contract at the time of sale, including the retail price for each accessory or item of optional equipment physically attached to the vehicle at the time of sale and any delivery charges and after the application of any incentives, but excluding separately stated taxes and fees required by state or local law. The sale price of a previously owned clean vehicle is determined before the application of any trade-in value. The sale price does not include separate financing, extended warranties or insurance.

Please note that the sale price for the purpose of the $25,000 limitation is also not affected by a buyer’s decision whether or not to transfer a Previously Owned Clean Vehicle Credit to a dealer.