EV / New Clean Vehicle Credit for 2024 if taxes owed are less than the credit?

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MidnightRider
MidnightRider Member Posts: 2 Newcomer

I believe in previous years, the EV tax credit would only reduce your tax burden. If you had a $7500 EV credit, but your taxes that year were only $3000, you'd only get a $3000 benefit and lose on the other $4500.

However, I read this is changing: https://www.irs.gov/newsroom/topic-h-frequently-asked-questions-about-transfer-of-new-clean-vehicle-credit-and-previously-owned-clean-vehicles-credit

Q4: What if a buyer has insufficient tax liability to fully use a transferred credit? (added Oct. 6, 2023)

A4. The amount of the credit that the electing taxpayer elects to transfer to the eligible entity may exceed the electing taxpayer's regular tax liability for the taxable year in which the sale occurs, and the excess, if any, is not subject to recapture from the dealer or the buyer.

Does this mean I can get the full $7500 benefit at time of sale, even if my taxes owed for 2024 are less than $7500?

Do you think IRS Form 8936 will be modified to make this clear? I tried filling it in, and the instructions state you can only claim the lesser of the credit or your actual taxes owed: https://www.irs.gov/pub/irs-pdf/f8936.pdf

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  • RustyL
    RustyL FreeTaxUSA Agent Posts: 22
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    Hey MidnightRider,

    Great question!  Unfortunately, this does not mean you will be able to claim the full credit on your tax return when your tax liability is lower than the credit.  The credit you can claim is still limited by your tax liability, but you can transfer any portion of the credit to the dealer (the 'eligible entity' mentioned in the FAQ) at the time of purchase.  If you do, the transferred credit is not limited by your tax liability, and is not subject to repayment via recapture.

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