The Inflation Reduction Act, signed into law on August 16, changes a few requirements for an EV federal tax break. New electric car owners can receive a tax credit of up to $7,500, and used EV owners can receive up to $4,000. Even better, you DON'T have to wait for your tax refund to get the credit!
Now with inflation, sky-high grocery prices, and out-of-this-world gas prices, EVERYONE is looking for a way to save. Well, if you are in the market for a new vehicle, going electric might be your ticket to keeping more of your money in your pocket (and getting some back at the end of the year). As with many administrations, past and current, many promises were made that have yet to (and probably never will) manifest themselves. Some of us were holding out for EV tax credits of up to $12,000...well, that's not coming anytime soon, but a new round of tax credits is here.
The Inflation Reduction Act, signed into law on August 16, changes a few requirements for an EV federal tax break. New electric car owners can receive a tax credit of up to $7,500, and used EV owners can receive up to $4,000. The biggest change is that the tax credit is based on your income. So who qualifies, what cars can you get, and how much money are you really getting back???
Who qualifies for the tax credit?
Tax credits now only apply to buyers with incomes less than or equal to $150,000 for single filers, $225,000 for heads of household, and $300,000 for joint filers.
How much car can I buy to qualify?
The price of the new EV purchased must be less than $55,000 for cars and below $80,000 for SUVs, pickup trucks, and vans to qualify for the credit. This is a step up from previous limits and represents how much cars cost the average consumer nowadays.
Can I get the tax credit on a used EV?
Yup! The new credit expands eligibility; if you buy a used EV, you could receive a credit of up to $4,000.
What cars qualify for the tax credit?
Another big change is the focus on American Made! If you want to purchase an EV with an up to $7,500 tax credit, you can only consider EVs assembled in North America and powered by batteries with materials sourced from the US or its free trade partners. FYI, Tesla's (and many other common EVs) battery materials are processed in China (sorry!)
Here is a full list of EVs manufactured in the United States that qualify for the credit
How do I claim the tax credit?
Instead of financing the full price of the car and then getting money back when filing taxes, buyers can immediately purchase the car at the dealership with the credit deducted from the price.
Can me and my spouse both use the credit?
Yes - two people in the same house can separately claim the credit if they buy two (2) EVs individually. If you buy the EV together, the credit only applies once.
So when can I begin claiming the credit?
January 2023 is when most EV dealerships should be ready to start processing the credit. The credit will be included in the final price of the vehicle.
What if the dealership does not deduct the credit?
You can then claim the deduction on your taxes. Remember that a tax deduction only reduces your overall tax liability; it is not automatically converted to a refund.
In the end, make the best financial and environmental decision for you and your family, but if you're considering an EV, better get it while the "gettin' is good"! If you have questions about your potential taxes owed, book a FREE Consultation and let us help you out!