When the calendar shifted from 2022 to 2023, a new Federal EV Tax Credit came into effect. As part of the Inflation Reduction Act, this new credit allowed automakers that had recently reached the maximum EVs for the credit to enjoy a reset. This new credit has put Tesla and GM back in the mix of brands that qualify for this incentive, but how can you make the most of your EV tax credit?
What is the maximum Federal EV Tax Credit?
This new version matches the original Federal EV Tax Credit with a maximum of $7,500 in tax credits owed. Certain rules apply, but if you purchase an eligible vehicle, the maximum credit is $7,500.
You must understand that the credit is for “up to” this amount. These short words carry a lot of weight. If you don’t owe at least $7,500 on your taxes at the end of the year, you won’t get the full credit. That said, driving a new EV could wipe out your entire federal tax debt this year.
What impact should this tax credit have on EV sales?
This new credit should help the auto industry to continue growing towards more electric vehicle sales. What was once just a footnote in the market and a comment, “how sweet, they sell electric vehicles too”, has become a growing percentage of the market. usa today reports that EV sales accounted for 7.1% of all new cars purchased last year.
While 7.1% is a far cry from the 50% put in place by the President, steady growth, additional EV offerings and tax breaks should push the market towards established targets.
When should you consider driving a new EV?
The market is ripe for EV purchases, but you might want to wait a little longer. Part of the Reduction of Inflation Act allows EV buyers to transfer the tax credit to the dealership to receive an immediate rebate. That benefit doesn’t start until 2024. Incidentally, many automakers have several new EVs hitting the market for the 2024 model year, which may ensure more variety in vehicle selection.
Could it become more difficult to receive the EV tax credit?
The tax credit will become more difficult to access when battery supply requirements come into play. These requirements may prevent some electric cars from qualifying for the tax credit. If you think the next vehicle you’ll drive will be an EV, it’s important to understand these requirements and restrictions to ensure you get the most credit available.
Are used electric vehicles eligible for the tax credit?
The new Federal EV Tax Credit includes an amount for used EVs for second owners. This means that the first time the vehicle is sold on the used market, it qualifies for this credit. The price of the used EV must not exceed $25,000 and must be sold through an authorized dealer, not a private individual.
Some regulations, qualifications and pricing restrictions are still being discussed and approved by Congress. If an EV is in your future, stay informed as the needle moves on what you’ll qualify for and how you can maximize that EV tax credit.