President Joe Biden signed Democrats’ landmark climate change and health care bill into law on Tuesday. It includes a tax credit of up to $7,500 that could be used to defray the cost of purchasing an electric vehicle.
Models included are the 2022 Ford F Series electric pickup, BMW X5, Nissan Leaf, Chevrolet Bolt, Jeep Wrangler plug-in hybrid, and all four Tesla models. A full list of models of assembled in North America is available here.
Consumers can click here for the NHTSA’s Vin Decoder and key in the 17-digit vehicle identification number of the EV they want to buy to make sure it’s made in the U.S., Canada or Mexico. The Treasury Department also released a frequently asked questions page on the new law’s provisions.
Effective January 1, the remaining electric vehicle provisions of the law will be in effect. However, as of August 16, tax credits are no longer available for vehicles assembled outside of the U.S., Canada or Mexico. Despite this, people who signed purchase contracts for EVs before August 16 could still receive the credits. In summary, the availability of tax credits for EVs has recently changed and it’s important to be aware of these changes when considering the purchase of an electric vehicle.
EV Tax Credit Details in the Inflation Reduction Act
• New electric and fuel-cell vehicles will get a tax credit of up to $7,500. Some plug-in hybrid vehicles will also continue to qualify.
• Only vehicles that cost below a certain amount will qualify. For SUVs, pickup trucks, and vans, the threshold is $80,000. For sedans, hatchbacks, wagons, and other vehicles, the credit cuts off at $55,000. (Read more about affordable EVs.)
• There will be no limit on the number of vehicles an automaker can sell that are eligible for the credit.
• Unlike in prior years, the exact amount of the new tax credit will depend on a complex set of calculations. It is based on where the vehicles are assembled and where the batteries are made from. Once these requirements go into effect, they get stricter each year through 2026.
• Only vehicles assembled in North America will be eligible for a tax credit.
• The exclusion of vehicles with components from “foreign entities of concern,” including Russia and China, will go into effect Dec. 31, 2023.
• Starting in 2024, dealerships will be able to offer the value of a tax credit upfront to consumers. This may simplify the process for car buyers.
• Car buyers must meet certain income guidelines. Households with an adjusted gross income up to $300,000 will still qualify for the credit. While heads of household must earn below $225,000 and individual filers will qualify only with income below $150,000.
• The income threshold is lower for used EV buyers: $150,000 for joint filers,$112,500 for a head of household, or $75,000 for an individual.
