The final rules could reduce the eligibility of some vehicles that might qualify for more at this time.
DALLAS — Advertisers have worked hard to extol the virtues of electric vehicles and educate viewers about the strides the industry has made in recent years.
They have produced commercials for electric vehicles that range from hot and fuzzy places to adventure spots fueled by adrenaline (and electricity).
But entertaining, sexy, and slick commercials may not be as compelling to consumers as a delay in rulemaking by the US Treasury Department.
Incentives for electric vehicles created by the Inflation Reduction Act in 2022 can be as high as $7,500. Keywords there: “As much as”.
Many vehicles will qualify for less than that or not at all.
That’s because the credit depends, in part, on… the parties. Where components are sourced and assembled will be an increasingly important consideration for credits offered in coming years.
Treasury has postponed specific decisions on some of those critical details until March 2023.
In the meantime, EVs that may eventually have decreased eligibility for incentives could qualify for a full $7,500 credit between now and March, when we get those additional rules from the federal government.
Is now the time to go electric?
So, as recent reports have pointed out, right now might be the time to go electric if you’ve been thinking about it. And many Americans may be thinking about it. Thanks in large part to credit, Cox Automotive predicts that, for the first time ever, the US will surpass 1 million electric vehicles sold this year.
But there might also be some value in waiting until next year to go electric. If you make a qualifying EV purchase this year, you can apply the credit when you file your tax return next year.
But those who buy an EV next year can take advantage of a new provision that will kick in and allow them to transfer the credit to the dealer at the point of sale, and simply get the sale price amount right away.
Many rules already established
Although we are still waiting for some of the rules, that detail and many other provisions are known. To be eligible, a vehicle must have a battery capacity of at least 7 kilowatt hours, have a gross vehicle weight rating of less than 14,000 pounds, and be manufactured by a qualified manufacturer.
Additionally, these are the income limits for a vehicle purchaser to qualify for the EV credit:
- $300,000 for married couples filing jointly
- $225,000 for heads of household
- $150,000 for all other taxpayers.
The $7,500 credit is non-refundable. If your total federal tax bill is $4,000, you cannot apply the $7,500 credit and get a refund of the $3,500 left over. You also can’t roll it over to another year, so in this scenario, you just wouldn’t get that part of the credit.
Also, regardless of sales price, the credit is based on the vehicle’s Manufacturer’s Suggested Retail Price (MSRP). To be eligible, the MSRP for Pickup Trucks, Sport Utility Vehicles and Pickups must not exceed $80,000. For other vehicles (such as sedans and coupes), the MSRP must be $55,000 or less.
The IRS has published a list of vehicles that currently qualify, but the list is a work in progress. You can also enter a vehicle’s VIN (Vehicle Identification Number) to see if it meets the eligibility requirements.