Current EV Tax Credits To End as Biden Signs Inflation Reduction Act — What Happens Now?
President Joe Biden’s Inflation Reduction Act, due to be signed into law on August 16, will have a major impact on electric vehicle tax credits — including a restructuring of credits worth up to $7,500.
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The bill will eliminate EV tax credits for most models currently getting up to $7,500, Reuters reported. However, those credits will be replaced by new tax incentives as well as a new $4,000 credit for used EVs.
The credit worth up to $7,500 has been updated to include individuals who buy new clean-emissions vehicles such as EVs, plug-in hybrids and hydrogen fuel-cell cars, CNBC reported. This credit will be available through 2032, though there are restrictions based on the buyers and vehicles. Here’s a quick rundown:
Married couples won’t qualify for the new-vehicle credit if their modified adjusted gross income (MAGI) on a joint tax return exceeds $300,000. For single tax filers, the AGI limit is $150,000.
You won’t qualify for the tax credit if your van, SUV or pickup truck costs more than $80,000. A $55,000 sticker-price limit also applies to certain other vehicles. As CNBC noted, the average sticker price for a new EV in June was roughly $67,000, or about $19,000 more than the industry average for all new vehicles, according to Kelley Blue Book.
Restrictions also apply to where the car was manufactured and where batteries and other vehicle parts were sourced. For example, EVs that are assembled outside North America will no longer qualify for the old EV tax credit, according to the Electrek website.
The idea behind the geographic restrictions is to accelerate domestic EV production and supply chains, CNBC noted. This could limit the tax break’s availability in the near term while automakers adapt to the new rules. The Alliance for Automotive Innovation trade group estimates that it might take a few years for vehicles available today to qualify for the full tax break.
The new bill also gives buyers of used EVs a credit of up to $4,000 or 30% of the sale price, whichever is less. Limits apply here as well. To earn the credit, your MAGI must be less than $150,000 for married couples or $75,000 for single filers. You also only get the credit if the vehicle’s sale price is $25,000 or less; it’s the first sale of the used vehicle; and the car model is at least two years old.
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These changes haven’t exactly been greeted with warm hugs from the auto industry. As Reuters reported, the Alliance for Automotive Innovation claims that when the new law goes into effect in 2023, it will greatly reduce the amount of vehicles that would qualify for the credit. That’s mainly because of restrictions on where EVs, batteries and components must be sourced.
But defenders of the bill say it will help make EVs accessible to a wider range of consumers while also bolstering the U.S. supply chain.
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This article originally appeared on GOBankingRates.com: Current EV Tax Credits To End as Biden Signs Inflation Reduction Act — What Happens Now?
