If you want to take advantage of the new electric vehicle (EV) tax breaks, and wonder when the best time to buy one is, you might want to consider a slew of factors. Eligibility for the tax breaks depends on a variety of criteria, from the model of the car (and where it was made) to your income and whether you wait for the new year.
President Joe Biden signed the Inflation Reduction Act (IRA) into law on Aug. 16, sweeping legislation which addresses climate, energy and healthcare issues. One of the provisions of the act is to provide tax credits to electric vehicle (EV) owners.
Right now, Americans can receive a tax credit of up to $7,500 for purchasing a new EV, with the caveat that the vehicle must be assembled in North America, and must be purchased and delivered on or before Dec. 31, 2022, per CleanEnergy.gov.
EV Federal Tax Credit For 2023
And beginning next year, “income-qualified households” will be able to receive a tax credit of up to $7,500 for new vehicles, as long as the EV is assembled in North America and has a battery that meets certain sourcing requirements. Those eligible are individuals reporting adjusted gross incomes of $150,000 or less, and the limit moves to $225,000 for those filing as head of household — and $300,000 for joint filers — according to Kelley Blue Book.
In addition, the administration explained that the EV must have a manufacturer’s suggested retail price of $80,000 or less for pickup trucks, vans, and sport utility vehicles (SUVs) — and $55,000 or less for other vehicles, including sedans.
As for previously-owned EVs, income-qualified households are eligible for a tax credit of up to $4,000, but the vehicle must be at least two years old and cost $25,000 or less.
In addition, while the new legislation puts a cap on income, it removes the cap on the number of EVs a company has sold. Under the current law, there is a cap of 200,000 vehicles sold to 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 turn, as of Jan. 1, the tax breaks will again apply to several carmakers, including Tesla, GM and Toyota.
Finally, for car buyers who want to wait a bit longer, there’s an added bonus starting in 2024. At that time, dealers will be able to offer the credit as a discount at the time of sale, directly reducing the price.
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