This January, new federal legislation went into effect with broad changes to the EV tax rebate program.
The biggest change is that the credit has been narrowed to include only those vehicles that were assembled in North America with a specific battery type. In addition, new income limits are applied to rebate seekers. Let’s explore:
The maximum $7,500 credit is only open for motorcars that satisfy all of the subsequent provisions:
- They are constructed in North America.
- Their battery includes at least 40% essential minerals that are removed or processed in America or countries that have free-trade agreements with the U.S., or reclaimed in North America. This ratio will rise to 80% by 2027.
- Their cost to consumers is below $80,000 for SUVs and pickups, and below $55,000 for passenger cars.
- The taxpayer’s modified adjusted gross income must be under $300,000 for married couples filing jointly, $225,000 for heads of households, or under $150,000 for other taxpayers.
The credit is decreased by $2,500 for each $1,000 that the vehicle’s price surpasses the appropriate point. For example, a car that costs $81,000 would be qualified for a credit of $5,000.
The credit is available for vehicles registered in the years 2023 through 2032.
Other provisions of the law include:
- A tax credit of up to $4,000 for EVs that are purchased used.
- A tax credit of up to $100,000 for the installation of EV charging stations for businesses.
- A notable mandate is that all newly constructed federal buildings be equipped with EV charging stations.
EV credits summarized
There are numerous tax incentives available for EVs in America at present. The largest is a federal tax credit, which is worth up to $7,500 for vehicles that qualify. The credit is phased out for taxpayers with modified incomes above certain levels.
In addition to the federal tax credit, there are a number of state and local tax incentives available for EVs. These incentives vary between states and can include, vehicle, charger installation, energy usage rebates, and special rates. Programs range from sales tax exemptions to rebate programs and state tax credits.
The following are some of the most typical tax incentives available for EVs:
- Federal tax credit: A maximum of $7,500 for qualifying vehicles.
- State tax credits: A number of states offer tax credits for electric vehicles. Also a maximum of $7,500.
- State rebates: A number of states offer rebates for electric vehicles of up to $2500.
- Sales tax exemptions: A number of states exempt electric vehicles from sales tax which can be as much as 10%.
- Local incentives: Some cities and counties offer free parking, charging, and access to HOV lanes on highways.