4:28 PM PDT
In an update to my previous blog written in December, there are now new rules that apply to the federal electric vehicle tax credit. These rules apply to new EVs purchased on or after April 18, 2023, and outline which vehicles qualify for the $7,500 EV tax credit.
What are the new rules for the tax credit, and how do they work?
The credit is now broken down into two parts, with each part qualifying for a separate $3,750 credit. The IRS is looking at these two components: the battery assembly location and the source of the battery’s critical minerals. Specifically, 50% (or more) of the battery components must be manufactured in North America to get one half of the credit, and 40% of the critical minerals must come from a US free-trade partner to get the other half. EVs that meet both requirements can qualify for the full $7,500 credit, while EVs that only meet only one of the requirements qualify for a $3,750 credit. Additionally, these requirements will become more restrictive each year going forward through 2027.
So, you ask, how does one find out which vehicles now qualify under these complicated rules? Lucky us, the IRS now has a list of qualifying vehicles on their website. The current link as of this writing: https://www.irs.gov/credits-deductions/credits-for-new-clean-vehicles-purchased-in-2023-or-after.
Also, remember that the price of a vehicle cannot exceed set MSRP amounts to qualify for the credit. These limit is $80,000 for SUVs, trucks, and vans, and $55,000 for cars.
Once you have determined which vehicles qualify, you must see if you qualify. Your adjusted gross income must be under $300,000 for joint filers and $150,000 for single filers.
Certain states have incentives, too, so it would be worth researching what benefits your state offers. In Washington State, for example, there is no sales tax for new “green” vehicles purchased for $45,000, or less.
If you are in the market for an electric vehicle, I encourage you to go to consumerreports.org for ratings, tips, and more information on available incentives.
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