Electric-vehicle (EV) buyers should look into the new incentives kicking off after the first of the year before deciding to purchase a new vehicle.
- The incentives tied to the Inflation Reduction Act kick off after the first of the year marking new changes for the EV buyer market.
- Individuals making $150,000 or less, heads of households earning $225,000 or less, and joint filers making $300,00 or less qualify for the $7,500 tax credit.
- A new price cap limits vehicles eligible to cars priced under $55,000 and trucks and SUVs under $80,000, which leaves out many Teslas.
- Only EVs assembled in North America qualify for the credit to boost American manufacturing.
Why it’s news
The new EV incentives tied to the Inflation Reduction Act are set to go into place on January 1, marking lots of changes for what EVs are eligible for the tax credit.
Before the Act, EV buyers could only receive the $7,500 tax credit if they bought one of the first $200,000 EVs produced by a manufacturer. This left out General Motors and Tesla, who had already reached that cap.
Now, after the first of the year, cars from the two manufacturers are eligible, but new limitations apply. The vehicles must be priced under $55,000, and trucks and SUVs under $80,000, as well as other rules.
Along with the new price limits, there are also manufacturing limits. The act was made to boost North American EV production, so only EVs assembled in North America qualify for the credit.
On January 1, 2024, more incentives and limitations will be implemented, including mining limitations and other options for the $7,500 credit.
Starting in 2024, new mining limitations will be put into place where certain materials needed to create the batteries for the vehicles will need to be mined in the U.S. and not other countries.
An incentive that will begin to take place is instead of the $7,500 credit being given back out in tax season, it can be taken off the purchase price of the car. This option will benefit people who want to purchase an EV, but can’t afford to wait until tax return season to get the money back.
With all the changes coming in the next two years, it is important for those looking to purchase an EV to look at both the limitations and incentives tied to the vehicle they are looking to buy and figure out the best way to get it for the lowest price.
Critics claim that while the credit is good for EV buyers, it is issued at the expense of non-EV buyers, since a $7,500 credit is tax money that the federal government is not receiving. “I should not be penalized for not buying an EV,” says Trevor Ruan of Lenox, Massachusetts.
What’s more, Toyota CEO Akio Toyoda says he is part of the silent majority in the auto industry that believe EV adoption will be slower than anticipated—and that the company should not be going all in on the sector.