Which electric vehicles qualify for the $7,500 tax credit?
(NEXSTAR) – After a summer dampened by inflation and painfully high gas prices, an electric vehicle tax credit never sounded so good — unfortunately, it’s a bit complicated.
Thanks to the Biden administration’s Inflation Reduction Act, shoppers can save up to $7,500 on new cars, trucks or plug-in vehicles in the form of a tax credit and $4,000 on used models.
Unfortunately, when it comes to who qualifies and for which EVs, the incentive may prove tough to navigate for many people.
The new 10-year tax credit, known as the Clean Vehicle Credit, is an amended version of a pre-existing EV credit that was amended in August. Whether or not you can get a massive break on your next tax bill depends on a number of factors.
Where is the vehicle manufactured?
Part of the complexity of the bill stems from the fact that the credit’s design is not just to encourage EV adoption, but also to wrest some supply chain control away from China and other countries outside of North America.
The EVs’ final place of assembly, for instance, has to be North America.
Below you can see a list of 2022 and 2023 EVs that will likely meet the final assembly requirement, according to the Department of Energy:
|2022||Chevrolet Bolt EUV||Manufacturer sales cap met until January 1, 2023|
|2022||Chevrolet Bolt EV||Manufacturer sales cap met until January 1, 2023|
|2022||Chrysler Pacifica PHEV|
|2022||Ford Escape PHEV|
|2022||Ford F Series|
|2022||Ford Mustang MACH E|
|2022||Ford Transit Van|
|2022||GMC Hummer Pickup||Manufacturer sales cap met until January 1, 2023|
|2022||GMC Hummer SUV||Manufacturer sales cap met until January 1, 2023|
|2022||Jeep Grand Cherokee PHEV|
|2022||Jeep Wrangler PHEV|
|2022||Lincoln Aviator PHEV|
|2022||Lincoln Corsair Plug-in|
|2022||Tesla Model 3||Manufacturer sales cap met until January 1, 2023|
|2022||Tesla Model S||Manufacturer sales cap met until January 1, 2023|
|2022||Tesla Model X||Manufacturer sales cap met until January 1, 2023|
|2022||Tesla Model Y||Manufacturer sales cap met until January 1, 2023|
|2023||Bolt EV||Manufacturer sales cap met until January 1, 2023|
|2023||Cadillac Lyriq||Manufacturer sales cap met until January 1, 2023|
|2023||Mercedes EQS SUV|
Some models on the list are built in multiple locations and therefore may not end up qualifying for the credit, according to the IRS.
If you’re interested in a car that isn’t listed, you can look up a vehicle’s build plant or country of manufacture using the U.S. Department of Transportation’s VIN decoder.
Along with the final assembly, there is yet another factor to consider that will take effect in 2023 — where the battery is built and where the minerals were sourced. Those requirements are set to become increasingly stringent in the future.
Under the $740 billion economic package that Biden signed into law, the tax credits would take effect next year. For an EV buyer to qualify for the full credit, 40% of the metals used in a vehicle’s battery must come from North America. By 2027, that required threshold would reach 80%.
NPR points out that it’s possible to get a partial tax credit of $3,750 if “40 percent of the critical minerals in EV batteries are sourced from countries with which the U.S. has a free trade agreement.”
Some industry experts are expressing concern that the bill’s goals may hurt near term adoption of electric vehicles.
“The tax credit that the new act replaces was really designed to encourage consumers to purchase an electric vehicle, to become more aware and to get into that vehicle, kick the tires and drive it away,” John Bozzella, president and CEO of the Alliance for Automotive Innovation, told WDET. “This new tax credit is really designed for a separate purpose. And that purpose is to really reduce the industry’s reliance on China for critical minerals, raw materials and battery components.”
Bozzella added that he the auto industry “absolutely supports” less reliance on China, but worries that it may take a long time for automakers to create a new supply chain.
Who is eligible to get the tax credit
The tax credit would be available only to couples with incomes of $300,000 or less or single people with incomes of $150,000 or less. And any trucks or SUVs with sticker prices above $80,000 or cars above $55,000 wouldn’t be eligible, knocking many EVs out of the credits.
Customers hoping to get a discount on the sales price without having to wait for a tax refund will have to wait until 2024 for the mechanism that will transfer the credit to dealers at the point of sale, according to the U.S. Treasury.
If you signed a contract and purchased an EV before the Inflation Reduction Act was signed on August 16, but didn’t receive the vehicle until the 16th or later, you can still receive the credit based on the prior rules, which don’t have the final assembly requirement.
The Internal Revenue Service and Treasure say they will continue to post updates on eligibility and the EV tax credit “in the coming weeks and months.”
The Associated Press contributed to this report.
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