President Biden signed the Inflation Reduction Act of 2022 into effect on Tuesday, August 16th. One of the major provisions in the new act contains updated guidelines on tax credits for electric vehicles (EVs).
The Act extends the $7,500 tax credit for EVs purchases and eliminates a barrier under the old credit that phased out incentives for any automaker once it sold 200,000 electric vehicles. The new law ends the 200,000-unit-per-manufacturer sales cap beginning in 2023.
The restructured EV credit also comes with new income limits and a cap on vehicle prices. The credit can only be used for car-based EVs costing $55,000 or less and $80,000 for electric trucks, vans and SUVs. On top of the EV price cap, buyers wanting to utilize the EV credit will have to take their annual adjusted gross income into consideration. Single filers earning $150,000 or less in adjusted gross income, head of household filers earning $225,000, and joint filers at the $300,000 level can claim the $7,500 credit.
Buyers will continue to claim the EV tax credit on their annual tax filing but beginning in 2024 will have the ability to transfer the value of the credit to dealers at the point of sale to immediately reap the benefits of the credit.
The Department of Energy recently released a list of qualifying vehicles that currently meet the updated guidelines set forth in the Inflation Reduction Act for 2022 & 2023:
|Model Year 2022||Model Year 2023|
|Audi Q5||BMW 3-series Plug-In|
|BMW 3-series Plug-In||Mercedes EQS|
|BMW X5 xDrive45e||Nissan Leaf|
|Chrysler Pacifica PHEV|
|Ford F Series|
|Ford Mustang Mach E|
|Ford Transit Van|
|Jeep Grand Cherokee PHEV|
|Jeep Wrangler PHEV|
|Lincoln Aviator PHEV|
|Lincoln Corsair Plug-in|
The Act also creates a new tax credit for used vehicles beginning January 1, 2023. The used EV credit is currently set at $4,000 or 30% of the vehicle cost, whichever is lower, and can only be applied to used vehicles costing $25,000 or less. The used EV credit will encompass more EVs as there are no current stipulations on vehicle manufacturing set forth in the new EV list above. Even though the used EV credit broadens the number of cars available, the qualifying income limits are more severe. Single filers earning $75,000 or less in adjusted gross income, head of household filers earning $112,500, and joint filers at the $150,000 level can claim the credit.
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