I was reading an article recently that approximately 40% of Americans have not heard about the EV tax credits.
EVs are battery
powered cars. We used to have hybrids, which sometimes used a motor and other
times a battery. EVs by contrast are 100% battery powered.
If you are
thinking about buying one for personal use, here are a few markers to keep in
mind:
(1) There was an OLD tax credit and now there is a
NEW tax credit.
a. The OLD credit went through April 18,
2023.
b. The NEW credit of course is after
April 18, 2023.
Both credits can get up to $7,500, so what changed was the
measuring stick.
Before April 19, the EV had to be assembled in North America.
After April 18, one test became two tests:
· The battery itself has to be
manufactured in North America, and
· Then critical minerals in the battery
(cobalt and lithium, for example) must be extracted or processed in the U.S. or
in a country with which the U.S. has a free trade agreement.
Notice that OLD $7,500 credit (assembled in North America)
has become two NEW credits of $3,750 each. You can get to $7,500, but along a
different route.
It matters. For example, the new Ford Mustang Mach-E only
qualifies for one of the credits – only $3,750 – because its battery comes from
abroad.
Some – like the Genesis GV70 – used to qualify for the old
$7,500 credit but no longer qualify for anything under the new rules.
If you are considering an EV, please double check whether the
vehicle qualifies. Here is the Department of Energy’s website:
https://fueleconomy.gov/feg/tax2023.shtml
(2) Congress included some price caps on qualifying
vehicles. These things are expensive, and Congress was trying to exert downward
pressure.
To qualify,
· A van, SUV or pickup truck must cost
$80 grand or less.
· Any other vehicle (a sedan, for example) must cost $55 grand or less.
(3) Starting in 2024, you will have the option of using the credit immediately when you purchase the vehicle. It would make for an easy down payment, I suppose.
The heavy lifting is done behind the scenes, as the dealerships will register on a new website to initiate and receive the credits. If you are curious, that website is:
(4) For the first time, used EVs will qualify for
a credit. This credit will not be as large as the one for new EVs, but it is
not insignificant either. Here are the ropes:
· The price must be $25 grand or less.
· The car must be at least two years
old.
· The car qualifies only once in its
lifetime.
· The credit is up to $4 grand, limited
to 30% of the price.
· You can claim the used EV credit once every three years.
(5) There are income limits on both the new EV and used EV credits. Make too much money and you will not qualify.
For example:
New EV
Married income < $300,00
Single income < $150,000
Used EV
Married income < $150,000
Single
income < $75,000
You can test for income either in the year of purchase or the immediately preceding year. I am thinking – to be safe – that one should generally go with the preceding year. It would be no fun to apply a $7,500 credit against the purchase of an EV and then give it back because you reported too much income on your 2024 tax return.
(6) Up to now, we have been talking about buying an
EV for personal use. There is a similar credit if you lease rather than buy,
but some rules are different.
· Since the leasing company (and not
you) owns the vehicle, the income test does not apply.
· The credit requires the EV be manufactured
by a “qualified manufacturer” rather than the two-step qualification discussed
above for a purchased vehicle. This should result in a wider selection.
· Mind you, the leasing company is not required to pass (all or any of) this credit on to you. Education is important here - and expect negotiation.
The reason the rules are different is that this second credit is designed for businesses – rather than individuals – buying an EV. By bringing in a leasing company, we flipped from the first to the second credit.
I am not in the market for a car myself. If I were, though, I would go in a very different direction.
