Clean Vehicle Credit for 2023
Pages 1 through 6 of the Tax Year 2022 M+O=CPE Individual Tax Year-End Workshop Reference Book have information on determining eligibility for the clean vehicle credit for vehicles placed in service during 2022.
The IRS recently issued additional guidance for vehicles placed in service during 2023, including a list of eligible models. See: https://www.irs.gov/credits-deductions/manufacturers-and-models-for-new-qualified-clean-vehicles-purchased-in-2023-or-after.
The IRS also recently updated its frequently asked questions regarding the credit for new, previously-owned and commercial clean vehicles. See https://www.irs.gov/pub/taxpros/fs-2022-42.pdf.
Notice 2023-1 says that the Treasury Department will issue guidance on applying the restrictions related to battery components and critical mineral requirements for the new clean vehicle credit, but it does not include a timetable for when such guidance will be released. (A recent update to the IRS Frequently Asked Questions indicates that such guidance is expected to be issued in March of 2023.) Once these new restrictions are issued and become effective, fewer vehicles are expected to be eligible for the credit for new clean vehicles.
Practitioners should warn their clients: Since the timing of the effective date of the new guidance on restrictions for the credit is not known, it is difficult to predict which new vehicles purchased during 2023 will be eligible for the credit, especially those purchased later in the year.
Separately, on December 29, 2022, the IRS also issued Notice 2023-9, which includes guidance on determining the incremental cost for commercial clean vehicles placed in service during 2023. The use of incremental cost in computing the commercial clean vehicle credit is discussed on pages 10 to 11 of the Tax Year 2022 M+O=CPE Individual Tax Year-End Workshop Reference Book.
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