The Inflation Reduction Act of 2022 changes the rules on electric vehicle credits. Are they still worth the investment and which ones does the credit apply to?
Electric vehicle credits have been extended for 10 years, until 2032. That means the $7,500 credit will stay in place for quite a while. The actual dollar amount however depends heavily on the vehicle itself. The credit applies to any “clean vehicle,” including those with plug-in hybrid capabilities depending on the battery capacity.
Some used electric vehicles also apply and will give the new owner the opportunity to take a portion of the full credit up to $4,000.
Starting next year, the credit can also be taken as a reduction at the time of purchase as opposed to the buyer having to wait to file their income tax return to receive the monetary benefit.
A big change for vehicles purchased and put into service after Aug. 16, 2022, they have a final assembly requirement. In order to be eligible for the credit, the vehicle must have final assembly occur in North America. This is a change from the previous policy.
The credit also cuts out after certain income limits are met. Married couples with AGI over $300,000 will not be eligible for the credit. The MSRP of the vehicle also cannot exceed $55,000 in order to qualify.
The bottom line is be careful with these credits. Buying EV’s for their clean fuel source is one decision but buying them for a tax credit isn’t foolproof. Make sure you dot I’s and cross t’s with your clients before agreeing they’re eligible.
The US Department of Energy also has published a list of EV’s that meet the final assembly requirement to help you and your clients make decisions.
The list can be viewed HERE.
