$7,500 EV Tax Credit: Use It or Lose It

Claiming the $7,500 tax credit for buying an EV (electric vehicle) or hybrid vehicle may not be as easy as you think. First, it’s a “use it or lose it credit” meaning if you do not have a federal tax liability of at least $7,500 in the year that you buy your electric vehicle, you cannot claim the full $7,500 credit and it does not carryforward to future tax years. Normally, most individuals and business owners adopt tax strategies in an effort to reduce their tax liability but this use it or lose it EV tax credit could cause some taxpayers to do the opposite, to intentionally create a larger federal tax liability, if they think their federal tax liability will be below the $7,500 credit threshold.

There are a number of other factors that you also have to consider in order to qualify for this EV tax credit which include:

• New income limitations for claiming the credit
• Limits on the purchase price of the car
• The type of EV / hybrid vehicles that qualify for the credit
• Inflation Reduction Act (August 2022) changes to the EV tax credit rules
• Buying an EV in 2022 vs 2023+
• Tax documents that you need to file with your tax return
• State EV tax credits that may be available

Contact Michael Ruger with Questions: 518-477-6686 or [email protected]
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