Topic E — Frequently Asked Questions About the Income and Price Limitations for Previously-Owned Clean Vehicles

Updated FAQs were released to the public in FS-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 previously-owned clean vehicle credit? (added December 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 the lesser of your modified AGI for the year that the previously owned 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) - $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 on a previously-owned clean vehicles eligible for the credit? (added December 29, 2022)

A2. If the sales price exceeds the $25,000 limitation for previously-owned clean vehicle, the vehicle is not eligible for the previously-owned clean vehicle credit.