On February 3, 2023, the IRS issued Notice 2023-16. Since the announcement of the clean vehicle credit, auto manufacturers and advocacy groups have been requesting updated definitions to vehicle classifications for more consistency and clarity for taxpayers.
Notice 2023-16 addresses those concerns. The guidance issued modifies the prior Notice 2023-01 and changes classification standards by which vans, SUVs, pickups, and other vehicles are defined. The IRS has also added more questions and answers to address additional items. As a result, the frequently asked questions related to eligibility rules for new and previously owned clean vehicles, income and price limitations, when new requirements apply, and qualified commercial clean vehicles have also been updated. IRS Fact Sheet 2023-4 has all current FAQs for the Clean Vehicle Credit.
The updated FAQs are as follows. Please see Fact Sheet 2023-4 for the answers to these, and all other, FAQs regarding the Clean Vehicle Credit.
Topic A: Eligibility Rules for the New Clean Vehicle Credit: Questions 1 and 8
Q1. What is a new clean vehicle for purposes of the new clean vehicle credit?
Q8. What does “original use” mean?
Topic B: Income and Price Limitations for the New Clean Vehicle Credit: Questions 2, 6, 8, 9, added new Question 7
Q2. Are there any price limitations on new clean vehicles eligible for the credit?
Q6. How do I know if my vehicle is a pickup truck, van, sport utility vehicle (SUV), or other type of vehicle for purposes of determining the applicable manufacturer’s suggested retail price for a vehicle?
Q7. If my vehicle’s classification changed since it was purchased can I claim the tax credit?
Q8. What information does a seller have to provide to a taxpayer purchasing a new clean vehicle to allow the taxpayer to claim the new clean vehicle credit?
Q9. When must the seller provide the report to the taxpayer?
Topic C: When the New Requirements Apply to the New Clean Vehicle Credit: Question 7
Q7. If I purchase a new clean vehicle in 2022 on or after August 16, 2022, but take delivery of the vehicle in 2023, do the income and MSRP limitations apply?
Topic D: Eligibility Rules for the Previously owned Clean Vehicle Credit: Question 4
Q4. Who is eligible to claim the previously owned clean vehicle credit?
Topic G: Qualified Commercial Clean Vehicles Credit: Question 6
Q6. What factors are used to determine if a transaction is a “lease” for tax purposes?
Written by Erin Kidd, EA, AFC®, MBA
Erin Kidd, MBA, EA, AFC
Erin Kidd is the Special Projects Manager at Thompson Greenspon and has nearly a decade of tax experience specializing in individual taxation. Throughout her career, she has focused on simplifying complex tax issues and educating clients to maximize their tax benefits and plan for future events. Erin holds a Bachelor’s and Master’s Degree in Business Administration from Morehead State University, is an Enrolled Agent, a federally licensed tax preparer who has unlimited rights to practice before the IRS, and an Accredited Financial Counselor ®. She has been recognized by the Garrison Commands of West Point, NY and Fort Leavenworth, KS for her contributions to the military community for her work with the installations’ Volunteer Income Tax Assistance Centers.