DIMO’s Guide to Upcoming EV Tax Credits
DIMO’s Guide to Upcoming EV Tax Credits
EV tax credits are coming very very soon! Here’s what you need to know about this historic bill.
On August 7th, the senate passed the Inflation Reduction Act, a bill that includes almost $400 billion in funding for climate and energy related programs over the next 10 years. Included in this bill was a revamped US electric vehicle tax credit, which had previously been outdated and obsolete to large automotive manufacturers like GM, Toyota and Tesla. Though this bill will go into effect on December, 31st 2022, it’s important to start thinking about how it affects you today.
Electric Vehicle Tax Credit Rundown
Eligible new EV purchases can result in a tax credit up to $7,500
Eligible used EV purchases can result in a tax credit up to $4,000
- No limit on incentives for manufacturer related to the number of vehicles they sell
The previous tax credit limited the incentive to the first 200,000 EVs a manufacturer sold
- Dealerships will be able to offer the value of a tax credit up front to consumers, rather than the customer having to wait until they file their taxes to receive the credit
Note: This will start in 2024
Eligibility How do I know if I’m eligible for the EV tax credits?
To limit the cost of the EV tax credits, the bill contains requirements that vehicles and owners must adhere to in order to be eligible for the whole tax incentive ($7,500).
- Must be assembled in North America
After 2023, cars with battery components from “foreign entities of concern” would be ineligible, and critical minerals must come from certain U.S. trade partners.
- Critical battery minerals must come from certain U.S. trade partners
After 2023, cars with battery components from foreign entities of concern (China, Russia) would be ineligible
Electric sedans must have an MSRP under $80,000
Electric vans, SUVs, and trucks must have an MSRP under $55,000
Available to individuals reporting gross income of $150,000 or less, or joint filers reporting gross income of $300,000 or less
This means popular EVs like the Hyundai Ioniq 5 and Kia Niro, as well as all current Toyota EVs will not be eligible due to the fact that they are manufactured outside of North America. Furthermore, the only Tesla vehicles eligible will be some versions of the Model 3 due to the $55,000 MSRP limit. For a much more detailed list of eligibility requirements, please refer to this article: Electrek: Here’s every electric vehicle that currently qualifies for the US federal tax credit
Used EV Tax Credit Eligibility
For the first time, used EVs aren’t completely excluded from the tax credit! This is big news for people trying to get into an EV at a lower starting cost. There are some key differences between the new EV and used EV tax credit however.
Electric vehicle (any type) must have a selling price of under $25,000
Available to individuals reporting gross income of $75,000 or less, or joint filers reporting gross income of $150,000 or less
Vehicle must be put in to service after December 31st, 2023
What this all means:
This bill is quite complicated, and more information is coming out seemingly every day. This article by Consumer Reports will be continuously updated as new information comes out about the bill.
In the meantime, it is safe to say that this new EV tax credit will be good in the long run (emphasis on the long). While this bill is complicated and riddled with restrictions, it is an indicator that politicians (and the rest of the country) are coming to grips with the fact that EVs are not only here to stay, but are the future of the automobile.
As demand for EVs continues to rise, so will the infrastructure to support them, which will further increase demand….and so on. At the very least, this bill will have a huge impact on the car industry for decades to come. We will look back at the early 2020s as a true shift in the history of the automobile, and this bill will be looked upon as a catalyst for that shift.
At DIMO, we believe that all cars should have the capabilities to be a part of the connected-car future. EVs specifically offer our users access to larger amounts of vehicle data, which will enable usage of more apps and services than traditional non-electric vehicles. This includes insurance, maintenance, financing, used car sales, fleet operations, charging infrastructure, and more.
The advantages EVs offer as a DIMO user, coupled with the savings associated with driving an electric vehicle (gas, tax credits, etc) make purchasing an EV a no brainer. To read more about DIMO and what we're building, click here.