What car buyers should know about the coming tax credits for EVs
It’s called the Inflation Reduction Act of 2022 but one of its primary goals is to fight carbon emissions by, among other things, giving Americans incentives to buy zero-emission vehicles.
Not everyone’s thrilled with the end result. The auto industry and environmental advocates have groused about the legislation, with car manufacturers calling the incentives package a “missed opportunity” for limiting it to cars built in North America, among other gripes. Environmentalists say the act could have done more to make clean-running cars affordable and accessible.
But for consumers thinking about going electric, the incentives could tilt the math in favor of nabbing that new Model 3 or F-150 Lightning sooner. Here’s what we know about the expected tax credit and what it means for buyers.
Starting Jan. 1, low- and middle-income Americans would be eligible for a $7,500 tax credit for buying a new clean-air vehicle — a designation that includes hydrogen fuel-cell vehicles as well as battery electrics — and $4,000 for buying a used one. The credits will be limited to single tax filers with an adjusted gross income of $150,000 or less, married couples filing jointly with an income of no more than $300,000, and individuals who file as the head of a household, making $225,000 or less.
Beginning in 2024, car buyers can take the tax credit as a discount at the time of the purchase.
The credit can’t be used for the priciest vehicles — only clean-air cars with a manufacturer suggested retail price of as much as $55,000 and $80,000 for SUVs and trucks. That disqualifies models such as the Hummer EV and the BMW i4.
To qualify for the full credit, a zero-emission vehicle must be assembled in North America and have key battery materials come from the U.S. or a country with a free-trade agreement with the U.S. If the vehicle meets only one of those criteria, the buyer can qualify for half of the credit.
Supporters of the legislation argue the credits will create an incentive for EV manufacturers to make production changes to meet the criteria.