EV Tax Credits Were Updated. Car Purchasers Should Know This

The new Inflation Reduction Act will affect EV customers. Some popular electric vehicles may get a tax credit again, while others won’t for the near future. Consumers, read this.
Changes?
The former subsidy offered $7,500 for new electric vehicle customers until automakers reached a 200,000 cap. Buyers of plug-in hybrids got less.

The Inflation Reduction Act’s new credit immediately replaces the former system and removes the 200,000 cap, but it sets new assembly, battery, and supply chain constraints. Plug-in hybrids will get a partial credit. The new law caps vehicle prices and buyer income.

How to get tax credit?

New law, which takes effect on January 1, 2023, has strict conditions for electric vehicle tax credits. North American assembly is required. North America must produce many of their battery components and minerals. Beginning in 2023, 40% of a vehicle’s battery minerals must be harvested or processed in the US or a free trade partner country. By 2027, 80% of battery minerals will be recycled. Starting in 2023, 50% of battery components must be made or assembled in North America, and 60% in 2024 and 2025. In 2029, it will be 100%.

Under the new lending system, pickups and SUVs can’t cost more than $80,000 and cars $55,000. Single buyers must make less than $150,000, heads of family $225,000, and married couples $300,000.
First-time buyers of secondhand EVs or plug-in hybrids can get $4,000.
You must buy a car by 2032.

New autos can get $7,500 if assembled in North America. Half of the $3,750 credit hinges on achieving battery materials and component requirements.
Some buyers of old EVs can get a $4,000 credit. Credit can’t exceed 30% of car price.
What cars get the $7,500 tax credit?
According to the Alliance for Automotive Innovation, which represents Ford, GM, Hyundai, Toyota, and Volkswagen, no electric vehicles now available will qualify for the full tax credit in 2023. New tax credit reduces eligible automobiles. 70% of electric, hybrid, and fuel cell vehicles eligible for purchase in the US no longer qualify for any subsidy, even partial.
Popular electric models like the Hyundai Ioniq 5 and Kia EV6 will lose eligibility unless manufacturers alter assembly locations.
Teslas, including the Model 3 and Y, were ineligible for a credit under the old arrangement once the company achieved the 200,000-vehicle maximum per carmaker in January 2020. This cap will be lifted on Jan. 1, 2023, and Teslas will again qualify for a tax credit, assuming the firm meets all new standards.
Consumers can enter a vehicle’s VIN into a US Department of Transportation website to discover its final assembly location and tax credit eligibility under the new law.

Exemptions?

A technicality in the measure keeps some electric and plug-in hybrids eligible until the end of the year. Biden’s signature only activated the North American assembly provision. Before January 1, when more stringent standards take effect, consumers interested in North American-made electric vehicles may want to buy.
Nissan told CNN Business that the Leaf will be eligible through 2022. Volvo expects the S60 Recharge to continue qualifying given DOE guidance.
Mercedes-Benz EQS SUV should be qualified by year’s end, but not the sedan because it’s not produced in the U.S. BMW’s X5 and 3-series plug-in hybrids are eligible through 2022.
Mustang Mach-E, F-150 Lightning, and Escape plug-in hybrid are eligible for the rest of the year.
This year’s automobiles must be delivered.
Rivian automobiles are built in North America, but any additional orders placed in the last months of the year won’t be credited because the automaker’s order backlog exceeds its production goal for the year, thus consumers won’t take delivery until 2023.
As the government finalizes the tax credit, automakers and customers are in limbo through 2023. How will the government assess if a car satisfies battery mineral and component thresholds? The IRS will give consumers a list of vehicles with their eligibility amounts.

Sen. Joe Manchin voted against importing electric vehicle components from abroad. Manchin said the US produced its own gas-powered vehicles and engines, so it should be able to make electric vehicles and batteries. Tax credits may encourage manufacturers to transfer battery processing and assembly to North America. Some analysts warn of national security hazards from importing electric cars.

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Buyers won’t get the tax credit until they submit taxes. Starting January 1, 2024, electric vehicle buyers can get the money at the point of sale if they transfer it to their dealership.

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