Transferability of Clean Vehicle Tax Credits to Dealers Beginning 2024

On October 6, 2023, the Internal Revenue Service (IRS) issued Revenue Procedure 2023-33, which provides required procedures to elect to transfer clean vehicle tax credits to dealers for immediate application to the purchase of qualifying electric vehicles. Beginning in 2024, qualifying purchasers may elect to transfer the tax credits at the time of purchase of new or previously owned clean vehicles to registered dealers to have the credits impact the purchase price. This procedure eliminates the necessity for the purchaser to incur a federal income tax liability to take advantage of the tax credits available under Internal Revenue Code (IRC) Sections 30D and 25E. 

IRC Section 30D was enacted by the Energy Improvement and Extension Act of 2008 to provide a credit for purchasing and placing in service new qualified plug-in electric drive motor vehicles. This section allows a maximum credit of $7,500 per vehicle, consisting of $3,750 if certain critical minerals requirements are met and $3,750 if certain battery components requirements are met.

IRC Section 25E was added by the Inflation Reduction Act of 2022 and provides an income tax credit for the taxable year equal to the lesser of 1) $4,000 or 2) the amount equal to 30% of the sale price to a qualified buyer who places a previously owned clean vehicle in service during the year. 

Qualifying purchasers of new clean vehicles cannot exceed modified adjusted gross income (AGI) thresholds in either the year of purchase or the preceding year to claim the credit. The married filing jointly modified AGI threshold is $300,000; the head of household threshold is $225,000; and all other filers threshold is $150,000. For qualifying purchasers of previously owned clean vehicles, the related thresholds cannot exceed $150,000 for married filing jointly, $112,500 for head of household, and $75,000 for all other filers.

To qualify for the credit, the manufacturer’s suggested retail price of a new clean vehicle may not exceed the following:

• Vans - $80,000
• Sport Utility Vehicles - $80,000
• Pickup Trucks - $80,000
• Other - $55,000

No more than two elections to transfer credits can be made each tax year beginning 2024 and ending in 2032. Elections could be made for two new clean vehicles or one new and one previously owned clean vehicle, but not for two previously owned clean vehicles.

Revenue Procedure 2023-33 includes a registration requirement for qualifying dealers, which will be open soon.

If you have any questions about transferring clean vehicle tax credits, contact our expert listed below. 

TECHNICAL INFORMATION CONTACT:

Ian Boccaccio
Principal
Ryan
469.399.4545
ian.boccaccio@ryan.com  

The material presented in this communication is intended to provide general information only and should solely be seen as broad guidance and not directed to the particular facts or circumstances of any individual who may read this publication. No liability is accepted for acts or omissions taken in reliance upon the content of this piece. Before taking (or not taking) any action, readers should seek professional advice specific to their situation from Ryan, LLC or other tax professionals. For additional information about this topic, please contact us at info@ryan.com.