Stay Informed: Changes to the Clean Vehicle Tax Credit

Changes to vehicle eligibility

Substantial modifications have been made to which vehicles qualify for the tax credit. Beginning on August 16, 2022, the final assembly point for the vehicle must be in North America. Two qualifications have also been added with respect to the CV’s pieces and parts: an increasing percentage of the critical minerals in the battery must come from the United States or a country with a Fair Trade Agreement with the U.S and an increasing percentage of battery components must come from North America.

Additional changes include:

• A limitation of 200,000 vehicles per manufacturer expires after 2022.
• The MSRP cap for eligibility cannot exceed $80,000 for vans, $55,000 for SUVs and pick-up trucks or $55,000 for other vehicles.
• The expansion of the credit to previously owned vehicles, with qualifications based on sales price, frequency of use, and age of vehicle.
• The expansion of the credit to commercial CVs, with qualifications based on fuel type and GVWR.

Changes to customer eligibility

In addition to vehicle qualifications for CV tax incentives, customers must also be within certain income levels to be eligible. A customer’s modified adjusted gross income cannot exceed $150,000 for single filers or $300,000 for joint filers to claim a CV tax credit.

Other nuances

The tax credit for a CV remains at a maximum of $7,500. If the domestic content of critical minerals and battery components threshold is not met, the credit is cut in half. For the new credit on previously owned vehicles, the amount is capped at $4,000 or 30% of the sale price.

Beginning after 2023, customers may assign the tax credit to a dealer, rather than claiming it on their own tax return. This modification will present unique challenges to dealers during the sales process.

As always, tax rules are always predicated on situations and thresholds. Contact your Brady Ware service team member for more information or to ensure you are in compliance on these new rules.