EV Tax Credits Set To Change Under Inflation Reduction Act

The government’s $7,500 tax credit gets extended + pre-owned EV credits are added, but so are price and income caps

President Joe Biden is expected to sign the Inflation Reduction Act into law, meaning much-needed reinforcements are on the way for healthcare, taxes and the environment. Included in the latter is a change to the tax credits attached to EVs, including new credits for used EVs, but also income restrictions that may land you ineligible for the tax credit.

Will EV buyers see any sort of increase to the maximum tax credit of $7,500? No. But the tax credit at that same amount will be extended through the end of 2032.

Are used EVs going to be eligible for tax credits? Some, yes. Used EVs that are at least 2 years old are eligible for a tax credit of up to $4,000, or 30% of the price of the car, whichever is lower. As for the price cap, the car needs to be under $25,000.

Which new EVs will qualify for the maximum tax credit of $7,500? Depends on the price, as well as the type of vehicle. For sedans, the MSRP needs to start under $55,000, and for trucks, vans and SUVs, the threshold is bumped up to $80,000 MSRP.

What are the income restrictions you mentioned? It’s different for new and used EVs. Let’s start with new: For single tax filers, you won’t qualify if your gross income exceeds $150,000, and for married couples filing jointly, the cap is $300,000. For used, single tax filers’ cap will be at $75,000 and $150,000 for joint filers.

What else should I know? There is no longer a cap on how many EVs an automaker builds before the credit dries up for that model. The new law would eliminate the 200,000 EV limit imposed for the tax credit, meaning cars from automakers like Tesla, Toyota, GM and more would be eligible once again. In addition, the new law would require each EV to have its final assembly in North America.

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Image: Ford Motor Company