WASHINGTON, D.C. – Under the new Inflation Reduction Act, signed into law on Tuesday by President Joe Biden, the pathway to earning federal tax credits on Electric Vehicles (EVs) has now become a bit more complicated, as the legislation has enacted several new factors that EV owners must adhere to in order to qualify. However, those who do indeed qualify under the Inflation Reduction Act’s new provisions may find it even cheaper to purchase EVs than ever before.
Previously, the federal government, in an attempt to incentivize the transition from gas-powered cars to EVs over the course of the last ten years, had offered the public a $7,500 tax credit to make the prospect more affordable. However, with the passing of this new bill, several new requirements have been put into place that will disqualify many of the EVs currently on the market from the credit.
Under the Inflation Reduction Act – which includes several provisions aimed at making EVs cheaper to buy in order to combat Climate Change, as well as minimizing the influence of China upon the American market – prospective owners of EVs must not earn above $150,000 – or $300,000 for joint filers – and the battery contained within the vehicle must have been manufactured within the United States, and include minerals mined or recycled on the continent.
The new law also denotes that at least 50 percent of batteries for EVs must be fully manufactured in either the U.S. or Canada by 2024, with that number rising to a full 100 percent by 2028; currently, the majority of components for EV batteries are obtained from China.
In addition, the legislation also places price caps on the EVs that will qualify for the full $7,500 tax credit, with a maximum of $55,000 for sedans, hatchbacks, and wagons and $80,000 for trucks, SUVs, and vans; pricier EV models will not receive the tax credit.
The Inflation Reduction Act also allows used EVs to receive tax breaks for the first time ever, with owners getting a credit up to $4,000 on vehicles that are over two years old with a price of $25,000 or less; unlike new EV requirements, used ones are not beholden to their batteries having been made in the U.S. only.
While these new regulations may prevent more affluent Americans from accessing these tax credits, they will also open up the market to lower-income families and individuals and help usher in earlier adoption of EVs than may have otherwise taken place, according to CarGurus Director of Industry Insights and Analytics Kevin Roberts.
It’s going to change the calculus for total cost of ownership,” he said. “If you are looking for that $7,500 tax credit, this law could change what type of vehicle you’re looking to purchase.”
Christopher Boyle is an investigative journalist, videographer, reporter and writer for SEARCHEN NETWORKS® as well as other independent news and media organizations in the United States. Christopher works on a wide variety of topics and fields, has been featured in print and online in a variety of publications, from local to national, and helps keep a keen-eye on what’s happening in the automotive world for Auto Buyers Market.