Article Highlights:Background Qualificationso Income Limito 4-wheel vehicleo Street Vehicleo Minimum Battery Capacityo Acquired for Original Useo Final Assemblyo MSRPo Critical Mineral and Battery ComponentsSeller Provided ReportList of Qualifying VehiclesTransfer of Credit to the DealerAlthough the credit for purchasing a new electric vehicle can still be as much as $7,500, Congress has added some new stringent qualifications as to which vehicles qualify, and for the first time Congress has limited who qualifies for the credit by barring the credit to higher income taxpayers.But first a little background. Prior to this change, a vehicle qualifying for the credit needed only to be a 4-wheel vehicle, with a minimum battery capacity of 5 kilowatt hours and a gross weight of less than 14,000 pounds. There was also a manufacturer limit of 200,000 units, after which the credit phased out over the subsequent four quarters. There were no qualification requirements for the purchaser of the vehicle.New Qualifications - Under the new law, starting in 2023 the vehicle and the buyer must meet far more stringent requirements for a taxpayer to qualify for the clean vehicle tax credit. Purchaser’s Income Limit - No credit is allowed for any tax year if the lesser of the modified adjusted gross income (MAGI) of the buyer for the:Current tax year, or The preceding tax year exceeds the threshold amount as indicated below. There is no phaseout and just one dollar over the limit means no credit will be allowed. Thus, Congress has essentially eliminated the credit for higher income taxpayers.Married Filing Joint or Surviving Spouse - $300,000Head of Household - $225,000Others - $150,000MAGI is the buyer’s adjusted gross income increased by any foreign earned income and housing exclusions and excluded income from Guam, American Samoa, the Northern Mariana Islands, and Puerto Rico. Vehicle Qualifications - To qualify, the vehicle must:Be a 4-wheel vehicle.Be a Street Vehicle that was manufactured primarily for use on public streets, roads, and highways.Have a Minimum Battery Capacity of 7 kilowatt-hours.Be acquired for Original Use by the taxpayer. Original use means that the vehicle has never been used by any taxpayer for any purpose. A vehicle is not a new clean vehicle if another person has ever purchased or leased the clean vehicle and placed it in service for any purpose. Where a vehicle is acquired for lease to another person, the lessor is the original user.Have had its Final Assembly in North America, which includes the 50 states, the District of Columbia, and Puerto Rico, Canada, and Mexico. Where the vehicle was manufactured can be determined from the 17-digit vehicle identification number (VIN). The VIN Decoder website for the National Highway Traffic Safety Administration (NHTSA) also provides final assembly location information. The website, including instructions, can be found at VIN Decoder. The VIN is permanently attached to a vehicle in several locations, appearing on the dashboard for most passenger vehicles and on the label located on the driver’s door frame. The VIN is also located on the window sticker of new vehicles and often appears on the vehicle listing on dealers’ websites. Meet the MSRP requirement - The manufacturer's suggested retail price (MSRP) cannot exceed:o $80,000 for vans, SUVs, and pickupso $55,000 for other vehicles The MSRP will be on the vehicle information label attached to each vehicle on a dealer’s premises. The MSRP for this purpose is the base retail price suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges or optional items added by the dealer, or taxes and fees.Even when a vehicle is purchased for less than the MSRP, the credit limitation on the price of the vehicle is based on the manufacturer's suggested retail price (MSRP), not the actual price paid for the vehicle. Meet the Critical Mineral and Battery Components test – Congress, in an effort to bring the battery manufacturing for electric vehicles to the United States, included a requirement that a percentage of critical minerals needed to manufacture batteries be extracted or processed in the U.S. or a country with a free trade agreement with the U.S. or recycled in the U.S. It also requires a percentage of battery components be manufactured or assembled in North America. The initial percentage is 50% and 100% after 2028.Luckily for a buyer the dealer must provide a report that certifies the vehicle meets these requirements by specifying the amount of credit the vehicle qualifies for.