Federal Tax Credits
The Federal Plug-in Electric Drive Vehicle Tax Credit can reduce the cost of purchasing a new electric vehicle by up to $7,500! Tax credit amounts vary based on the purchaser’s tax liability and the specific vehicle.
IMPORTANT UPDATE: The Inflation Reduction Act (IRA), signed into law on August 16, 2022, makes significant changes to the credit that affect which cars qualify for the full $7,500 consumer tax credit. Below is the latest information we have on the Electric Vehicle Tax Credit based on updates from the IRA.
Federal Tax Credit: Up to $7,500
The first thing to understand is that the tax credit that has been in effect since 2009 was replaced with a tax credit that prioritizes domestic manufacturing of EVs. So, if you have already purchased and received your car by August 16, 2022 (or entered into a binding purchase agreement), you will be able to claim the $7,500 credit, unless that manufacturer had already reached their sales cap (namely Tesla and General Motors).
If you purchased or received your EV after August 16, 2022 and you did not have a binding contract in place already, you will only be able to qualify for the revised tax credit if your vehicle is eligible.
To qualify for the full $7,500 credit, electric vehicles must be:
- Effective immediately, all EVs must be built in North America to qualify for the tax credit
- Starting in 2023, EV models must meet the following domestic content and sourcing requirements to be eligible for the full tax credit:
- A credit of $3,750 if the materials for an EV’s battery have been sourced in the United States (or from a U.S. trade ally)
- An additional $3,750 credit if an EV model’s battery components have been assembled or manufactured in the United States (or by a U.S. trade ally).
As of today, these changes to have drastically reduced the number of vehicles that qualify for the credit. An updated list of vehicles that qualify will be maintained by the Federal Government and can be accessed here. We expect that over time the number of vehicles will grow as the IRA removed the per-manufacturer cap for tax credit eligibility.
The new vehicle tax credit includes income caps.
- Joint filers whose adjusted income is less than $300,000 ($150,000 for single filers) will be eligible for the credit.
- Sedans have to be under $55,000 to qualify,
- Trucks, vans, and sports utility vehicles can’t exceed $80,000.
Finally, purchasers will be able to transfer the EV tax credit to qualified auto dealers starting in 2024, enabling purchasers to immediately use the tax credit as an upfront discount on the purchase price of the vehicle.
New Vehicles Purchased by Consumers
|DATE||Before Aug. 16 2022||Aug. 16-Dec. 31, 2022||Jan. 1 2023-Dec. 31, 2032|
|Per Manufacturer Cap||Tax credit capped for manufacturers selling over 200,00 EVs||Tax credit capped for manufacturers selling over 200,00 EVs||Per manufacturer cap eliminated|
|Requirement for final assembly to be in North America||No||Yes||Yes|
|Battery Component Location Requirement||N/A||N/A||At least 50% of battery components in an EV model must be manufactured in the U.S. or with a country that U.S. has a free trade agreement, increases to 100% in 2029 $3,750 credit for EV models that meet requirement|
|Critical Battery Minerals Processing and Recycling Location Requirement||N/A||N/A||At least 40% of critical minerals in the battery components in an EV model must be recycled or processed in the U.S. or with a country that U.S. has a free trade agreement, increases to 100% in 2029 $3,750 credit for EV models that meet requirement|
|Per Vehicle Price Cap||N/A||N/A||$55,000 or less for a passenger car $80,000 or less for an SUV, van, or pickup|
|Taxpayer Income Limit||N/A||N/A||Individual: $150,000 or less Head of Household: $225,000 or less Joint: $300,000 or less|
|Transfer Credit Direct to Auto Dealer||N/A||N/A||Available starting Jan. 1, 2024|