The world of electric vehicles (EVs) is quickly gaining momentum, and Minneapolis, Minnesota, is no exception. With the EV market starting to explode, the government has introduced various incentives to promote their adoption, including a new tax credit called the "Electric Vehicle Tax Credit."
In this comprehensive guide, we'll cover how the EV tax credit works in Minneapolis, updated for the 2024 year, and how you can maximize this credit to make your transition into an electric vehicle more affordable.
Note: This material is not suitable as tax advice. Consult a tax advisor regarding your specific tax situation and eligibility for EV tax credits.
New federal tax incentives make the purchase of certain new or used electric vehicles (EVs) highly attractive provided that the buyer and the vehicle meet the requirements set forth by the IRS.
Eligible buyers may be able to claim a tax credit of up to $7,500 for purchasing an eligible new clean vehicle and up to $4,000 for an eligible previously owned clean vehicle. Information about eligible vehicles is available at FuelEconomy.gov.
A clean vehicle typically refers to a vehicle that has lower emissions of pollutants compared to traditional internal combustion engine vehicles powered by gasoline or diesel. The term is often associated with vehicles that use alternative fuels or advanced technologies to reduce their environmental impact. Here are some examples of clean vehicles:
For vehicles sold on or after January 1, 2024, dealers and sellers must register with IRS Energy Credits Online and use the tool to electronically submit time-of-sale reports. It is not necessary for the buyer to register on the IRS website.
Starting January 1, 2024, buyers can choose to transfer a clean vehicle credit to a registered dealer in exchange for an equivalent reduction in the purchase price of the vehicle. That means eligible buyers can get money upfront for buying a clean vehicle, rather than having to wait to claim their credit on their tax return the next year. When a buyer transfers a tax credit, registered dealers must provide certain disclosures and receive attestations from the buyer at the time of the vehicle sale.
To receive the EV tax credit, your vehicle must have a gross vehicle weight rating of less than 14,000 pounds. Final assembly in North America. Minimum battery capacity of 7 kilowatt hours. Vehicles must be made by a qualified manufacturer. MSRP limitations apply, based on the type of vehicle ($80,000 for Vans, Sport Utility Vehicles, and Pickup Trucks, and $55,000 for other vehicles). For vehicles sold on or after April 18, 2023, the credit amount will depend on the vehicle meeting the critical minerals requirement ($3,750) and/or the battery components requirement ($3,750). Income limits apply to taxpayers ($300,000 for joint filers, $225,000 for heads of households, $150,000 for all other taxpayers). Information on qualifying new vehicles can be found at FuelEconomy.gov.
Sellers must provide reports to the buyer and the IRS regarding the sale of the vehicle, including the name and taxpayer identification number of the seller. Name and taxpayer identification number of the buyer. Vehicle identification number (VIN) of the new clean vehicle. Battery capacity of the new clean vehicle. Verification that the buyer is the original user of the new clean vehicle. The date of the sale and the sale price of the vehicle. Maximum credit allowable for the new clean vehicle being sold.
The sale price must be $25,000 or less (does not include separate financing, extended warranties, insurance, and separately stated taxes and fees required by state or local law). The model year of the vehicle must be at least two years earlier than the calendar year in which a taxpayer acquires the vehicle (e.g., if purchasing the vehicle in 2024, the used vehicle model year must be 2022 or earlier). The vehicle’s gross weight rating must be less than 14,000 pounds and have a battery capacity of least 7 kilowatt hours. Further, the vehicle must not have already been sold as a used vehicle after August 16, 2022, based on the vehicle history report. That is, this must be the first re-sale of the vehicle since August 16, 2022.
Buyer’s modified adjusted gross income limitation: joint filers: $150,000, heads of households: $112,500, and all other filers: $75,000. The buyer cannot be the original owner. The purchase of the vehicle must be for personal use (not business use) and must not be intended for prompt resale. Further, the buyer cannot have claimed another used clean vehicle credit in the 3 years before the purchase date, and the buyer cannot be claimed as a dependent by another taxpayer.
Each time an eligible vehicle is sold, the registered dealer, with the buyer present, will complete a time-of-sale report on the IRS website. The report will be accepted/rejected in real-time. The dealer will then provide a copy of the report to the buyer, which the buyer should retain for tax purposes.
Minneapolis, with its state and local incentives, presents an amazing opportunity for electric vehicle adoption. As the world moves towards electric transportation, these credits play a vital role in making EVs accessible to a wider audience while contributing to a cleaner and greener future. With these incentives, your journey towards electric transportation in Minneapolis becomes not only eco-friendly but also economically rewarding.
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