IRS Issues Guidance and Updates FAQs on Clean Vehicle Credits
The IRS recently issued a proposed regulation related to certain requirements that must be met for critical minerals and battery components for the new clean vehicle credit, as well as updated the frequently asked questions (FAQs) for the clean vehicle credits.
The Inflation Reduction Act (IRA) allows a maximum credit of $7,500 per vehicle, consisting of $3,750 in the case of a vehicle that meets certain requirements relating to critical minerals and $3,750 in the case of a vehicle that meets certain requirements relating to battery components.
The critical mineral and battery component requirements will apply to vehicles placed in service on or after April 18, 2023, the day after the Notice of Proposed Rulemaking is issued in the Federal Register.
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. 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.
This means that the vehicle may or may not be eligible depending on whether it meets the critical mineral and battery component requirements.
As a result of this guidance, the IRS updated the FAQs for the clean vehicle credits. Fact Sheet 2023-08 updates FAQs related to new, previously owned and qualified commercial clean vehicles.
The FAQs revisions are as follows:
- Topic A: Eligibility Rules for the New Clean Vehicle Credit: Questions 2, 3, 4, 5, 6, and 7, added question 11
- Topic B: Income and Price Limitations for the New Clean Vehicle Credit: added question 2, renumbering questions 2 through 10 to 3 through 11, respectively, updated questions 1, 3, 7, 8, and 9
- Topic C: When the New Requirements Apply to the New Clean Vehicle Credit: Questions 2, 4, 5, and 6, added question 8, renumbered prior question 8 to question 9
- Topic F: Claiming the Previously Owned Clean Vehicles Credit: Question 2
- Topic G: Qualified Commercial Clean Vehicles Credit: Added question 10
The IRS stated that the FAQs are being issued to provide general information to taxpayers and tax professionals as expeditiously as possible.