If you are interested in buying an electric vehicle (EV), one of the best ways to make the purchase more affordable is by taking advantage of any available tax credits and EV incentives. The good news is that there is an increasing focus from global leaders on transitioning away from internal combustion engine (ICE) vehicles to EVs. This focus is creating new opportunities for consumers to make EV purchases.
Back in 2009, the Qualified Plug-in Electric Drive Motor Vehicle Credit became one of the first EV incentives in the United States. This program provided a small tax credit of $2,500 to those who purchased a qualified plug-in EV. While this credit has been extremely beneficial for those transitioning to an EV, it has needed reform and updates.
This is where the new Inflation Reduction Act (IRA) is revamping the approach to green energy in the United States. Often when these new incentives are first passed, there is a lot of confusion about what exactly they mean, and it is easy to see why. These acts are usually filled with complex regulatory information that can feel overwhelming and difficult to navigate. That’s why we are here to help by demystifying the IRA EV incentives. Let’s take a look at what these new policies mean and how you can use them to fund the purchase of an EV.
First, let’s start by understanding the IRA. The IRA was signed into law by President Joe Biden on August 16, 2022. The goal of the IRA is to make green energy and technology more affordable to lower and middle-class income consumers.
The IRA is monumental. This act is the single largest investment that the United States has ever made toward tackling the climate crisis. Not only does the IRA address climate-related issues, but it also seeks to advance environmental justice and position the United States as a global leader in clean energy manufacturing. It is for this reason that much of the stipulations around which EVs qualify for incentives revolve around U.S. manufacturing. This leads us to what is changing around EV incentives with the passing of this new act.
First, the Qualified Plug-in Electric Drive Motor Vehicle Credit (IRC 30D is now known as the Clean Vehicle Credit). As a part of the IRA, the Clean Vehicle Credit has changed EV incentives in a few key ways.
One of the best parts of the updates to EV incentives is that it now includes used vehicles. This is great news, as used vehicles account for the majority of vehicle purchases in the United States. Now, consumers who are interested in EVs but wish to take advantage of the incredible savings of purchasing used can tap into EV credits.
The amount of money provided by the new EV incentive is higher than before. Now, consumers are eligible for a total of $7,500 toward the purchase of a new EV. For used EVs, consumers can receive a $4,000 credit or up to 30% of the vehicle’s price. With the increasing costs of vehicles and inflation concerns, this dramatic uptick in credits will help bridge the gap for interested EV buyers.
The EV credit is no longer a traditional delayed tax credit. Under the Qualified Plug-in Electric Drive Motor Vehicle Credit, consumers had to purchase a vehicle using their own financing. When filing taxes, they were eligible for a tax credit to help cover the costs. Now, you will actually receive the credit at the time of purchase. The credit amount you qualify for will be taken off of your total sale price. This makes it easier to finance the purchase of an EV upfront, providing consumers with lower monthly payments.
There are new stipulations around how an EV is manufactured. Specifically, the EV must be assembled in North America. To receive half of the credit for a new vehicle, the battery components must also be manufactured or assembled in North America. Additionally, there are regulations around where the critical minerals used in the EV battery were sourced, which unlocks the second half of the credit. Check out this current list of EVs with Final Assembly in North America from the U.S. Energy Department to find out which vehicles are specifically eligible.
Consumers should understand two key restrictions when purchasing an EV using the new EV incentives.
First, the price of the vehicle. For new vehicles, the price of a car must be less than $55,000. For SUVs, pickup trucks, and vans, the price must be below $80,000 to qualify for the credit.
For used vehicles, the price of the EV must be under $25,000, and the vehicle must be at least two years old and sold by a dealer.
Additionally, according to the new act, only individuals having a modified adjusted gross income below the following thresholds are eligible for the EV incentives:
The newly updated EV incentives signify an exciting time in our history. With more money being invested into the climate crisis, there is an increasing opportunity for all of us to do our part to contribute to a greener future.
Through the IRA, buying an EV is becoming easier than ever before. Whether you are upgrading to a newer, more efficient EV or purchasing your very first EV, we are here to celebrate with you as we reach new milestones in green energy.
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Published March 4, 2023 2:26AM
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