EV Tax Credit: How Electric Car Owners Could Reap Benefits of Inflation Reduction Act
This article was edited to clarify that the credit is also available for used electric vehicles.
Electric vehicle (EV) owners could reap the benefits from the stunning deal on climate change and healthcare reached last week between Senator Joe Manchin and Senate Majority Leader Chuck Schumer in order to fight inflation — the Inflation Reduction Act of 2022.
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The act would extend $7,500 in tax credits to EV owners, but puts a cap on salaries. For joint returns it would be $150,000, for head of household it is $112,500, and for a single taxpayer it is $75,000, according to the text of the bill. It also contains incentives for used electric vehicles.
For EV companies under the current law, however, there is a 200,000 sold vehicles cap for which the credit can be applied, and Toyota was the latest carmaker to have crossed it in July. Under the new bill, the cap would be removed, something several automakers have been lobbying for.
In June, several CEOs — GM’s Mary Barra, Ford’s Jim Farley, Stellantis’ Carlos Tavares and Toyota North America’s Tetsuo Ogawa — wrote a letter to Congress asking for a lifting of the cap, claiming that eliminating it “will incentivize consumer adoption of future electrified options and provide much-needed certainty to our customers and domestic workforce,” as GOBankingRates previously reported.
“We remain hopeful that Congress will advance legislation to address energy and economic security that includes a modification to the EV tax credit removing the per-[automaker] cap,” GM spokesman Matt Ybarra told CNN. “We will review the draft text and look forward to working with Congress on these provisions that would ensure a level playing field for all [automakers].”
In addition, under the Inflation Reduction Act, buyers of used cars could receive a $4,000 credit. However, the sale price of the vehicle can’t exceed $25,000, according to the text of the bill.
Finally, a crucial change would be that EV buyers wouldn’t have to wait until they file their taxes to get the tax credit, according to Sam Abuelsamid, an electric vehicle analyst with Guidehouse Insights. The credit would be applied at the time of purchase at the dealer.
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“By taking it off the top, you can actually lower your monthly payment,” he told CNN.
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