Sparking Change: Electric Vehicle Tax Credits in the Inflation Reduction Act
If you’ve been considering an electric vehicle purchase, there’s some welcome news in the new Inflation Reduction Act – but there are some caveats, and some important steps for automobile dealerships to take now.
On Tuesday, August 16, 2022, President Joe Biden signed the Inflation Reduction Act of 2022 into law. In addition to updating the already existing $7,500 tax credit for new electric vehicles, the bill introduced a $4,000 tax credit for the purchase of used electric vehicles – though there are limits on the price of the vehicles.
Know your limits
To be eligible for the new electric vehicle credit, the price cannot exceed $55,000 for electric cars and $80,000 for SUVs and pickup trucks – and there are limits on income, too. In addition to the price limits on the vehicle, individuals will only be able to claim the credit if their Modified Adjusted Gross Income does not exceed the following – $300,000 for taxpayers filing jointly, $225,000 for heads of households, or $150,000 for single taxpayers.
Timing is everything…and location, location, location
These changes take effect on January 1, 2023. It’s also required, as of August 17, 2022, that the electric vehicles undergo their final assembly in North America to be able to qualify for the new vehicle incentive. One thing to note is that the “Final Assembly” requirement is the only one that takes effect immediately after August 16th as most of the law changes will phase in over time.
Directly after this Act was signed into law, the Department of Energy created a list of eligible electric vehicles that meet the criteria for the credit. This list is subject to change in 2023 as further changes prescribed by the law are set to take effect. The published list as it stands is available on the Department of Energy website.
Making electric vehicles more affordable
According to the Treasury Department, starting January 1, 2023 consumers will be eligible to receive credit on used electric vehicle purchases, and businesses will have the opportunity to qualify for a new commercial clean-vehicle credit with the hope that these tax incentives will make buying electric vehicles more affordable.
The deal for dealerships
It is recommended that all dealerships check the electric vehicle’s VIN number to determine if the vehicle qualifies for the “clean vehicle credit” (Previously labeled the Qualified Plug-In Electric Drive Motor Vehicle Credit in earlier versions of the legislation.)
There’s a lot to unpack on the changes to the electric vehicle tax credits as the IRS and Department of Treasury will be posting additional information throughout the coming weeks and months. If you have a question or would like to explore how the new credits can help build your electric vehicle business, contact our team of automobile dealership pros for a free consultation. We’re here to help with any questions you have as we continue to stay informed on the latest updates.