It’s not often that tax credits are extended for 10 years, but that’s exactly what happened with the Inflation Reduction Act. This is great news if you’re looking to buy electric vehicles, as the up to $7,500 EV tax credit is now available until December 2032.
This law also created a new credit the applies to used EVs. Previously owned clean vehicles that are at least two years old could qualify for a separate tax credit of either up to $4,000 or 30% of the price of the vehicle, whichever is less. So if you’re in the market for a used EV, now is definitely the time to buy!
The credit you receive will be based on a calculation that considers factors like the vehicle’s sourcing and assembly.
Also new, you’ll be able to take the EV tax credit as a discount when you buy a clean car starting in 2024. This means that you don’t have to wait until tax time to get the credit. The dealer will take the tax credit for you and give you a lower price for the car.
Before the Inflation Reduction Act, if a manufacturer produced more than 200,000 electric cars, the car no longer qualified for the tax credit. But now there is no limit on how many electric cars a manufacturer can make and still qualify. This means that some cars made by manufacturers who have made more than 200,000 cars (like General Motors, Toyota, and Tesla) will now be eligible for the credit.
However, as of the day President Biden signed the Inflation Reduction Act into law, there is a new requirement that final assembly take place in the US. This requirement is effective for all cars made after that day. There is also a similar requirement that minerals and other key components (i.e., battery components) used to manufacture EVs be primarily sourced in North America.
The IRS and Treasury have published information to help you know whether the vehicle that interests you will qualify for an EV tax credit under Inflation Reduction Act. They include a list of vehicles which do qualify as well as answers on frequently asked questions you might have regarding this new law! The Department Of Transportation also has their own tool where you can enter your VIN and determine if it is eligible or not.
The new IRC Section 45W tax credit can help you pay for a commercial clean vehicle. This tax credit is 15% of the cost of the vehicle, up to $7,500 for light-duty vehicles and $40,000 for heavy-duty vehicles.
Isn’t this exciting? It is great news to me! I think I might just go ahead and trade in my old car for something new… If you’d like to see how this can help lower your tax bill, call me today!