NEW TAX CREDIT FOR ELECTRIC AND HYBRID VEHICLES

In August 2022, the Internal Revenue Service (IRS) announced a new tax credit for electric vehicles (EV).  Drivers who purchased an EV or plug-in hybrids after December 31st, 2009, will be credited between $2,500 – $7,500.  For this credit, qualified EVs are defined as “Plug-in Electric Drive Motor Vehicles” such as passenger vehicles and light trucks.  The basic details regarding these amounts can be found below.

Credit Amount    Qualification    Details
$2,500    Own an EV    Base credit
$417    5KWh capacity battery    Minimum of 5 kilowatt hour capacity battery
$417    Over 5 KWh capacity battery    Additional credit added for every kilowatt over 5 hour capacity
$7,500    Own an EV    Credit limit

In addition to the EV Tax Credit, the Inflation Reduction Act was also passed in August 2022, further detailing which vehicles may qualify for the credit.  The provisions in the new act will not only benefit North American consumers who purchase EVs, but also the manufacturers.  Prior to the Inflation Reduction Act, manufacturers were limited to selling 200,000 EVs that could qualify for the tax credit to consumers.  Thankfully, the new act has removed this limitation and has added new guidelines that consumers can benefit from, like the ones listed here.

More Qualifications For EV Tax Credit

• Pickup trucks, vans, and SUVs priced below $80,000
• Wagons, sedans, and other light vehicles priced below $55,000
• Must be purchased on or after 12/31/09
• Must be assembled in North America
• Buyers for new EVs must meet income requirements
  • Less than $300,000 household adjusted gross income
  • Less than $225,000 head of household gross income
  • Less than $150,000 individual gross income
• Buyers for used EVs must meet income requirements
  • Less than $150,000 household adjusted gross income
  • Less than $112,500 head of household gross income
  • Less than $75,000 for individual gross income
• Used EV purchased from dealerships eligible for the lower amount of either $4,000 or 30% of sale price as tax credit

Changes Scheduled to Begin in 2024

• To qualify for tax credit, EV components cannot be sourced from “foreign entities of concern” (ex. China, Russia, etc)
• Dealerships will be permitted to offer consumers the tax credit up-front, at the time of purchase

Additional EV credits will vary by state.  Visit your state’s government website to determine if there are more opportunities available.