An Overview of the Tax Credits for 2023
As of January 1st, the electric vehicle purchase tax has undergone significant changes following President Biden’s signing of the Inflation Reduction Act. The sweeping changes affect new EV purchases and the available tax credits.
When choosing your next (or first) electric vehicle, you must know the various incentives and financial factors that will influence your decision. This article will provide you with important information about the federal tax credit for electric vehicles, although it’s worth noting that state and local governments may also offer additional incentives.
What Vehicles Qualify: It’s important to know that only some electric vehicles qualify for the credit. When considering the new tax credit, it’s essential to check which car models are eligible. For example, some Tesla, Chevrolet, and Toyota models may qualify for the full $7,500 tax credit, while others, like the Lucid Air and Hyundai Ioniq 5 or Kia EV6, may not be eligible. In addition, both fully electric (BEV) and plug-in hybrid vehicles (PHEV) may be eligible for the credit, but the act has major stipulations for vehicles to qualify.
The tax credit is only available for sedans that cost less than $55,000 or SUV’s and trucks that cost less than $80,000. Electric vehicles can be a little more expensive, and it may be more challenging to find an EV that meets the requirements.
Note: Some vehicles listed on the IRS website as potentially eligible for a credit actually don’t qualify right now because their price is too high.
Confusing differences between cars and SUVs classifications are taking time to determine whether a vehicle is subject to the sedan $55,000 cap or the suv/truck $80,000 cap to be eligible for those tax credits.
Consumers are confused and frustrated regarding the classification of vehicles while trying to confirm purchase tax credit eligibility. The IRS categories are based on criteria for fuel economy for ICE vehicles, but the classifications are only sometimes what consumers expect. For example, the IRS considers the Volkswagen ID.4 a car unless it has all-wheel drive, which is classified as an SUV. On the other hand, vehicles consumers might consider SUVs, such as the Tesla Model X and the plug-in Lincoln Corsair, are classified as cars.
Important Fact: EVs have to be made in the U.S.
For example, the Kia EV6 and Hyundai Ioniq 5 are currently not eligible for a purchase credit, although it may be possible to lease these models. On the other hand, the eligibility of the Volkswagen ID.4 for the credit depends on factors such as where the vehicle was manufactured. ID.4s made in Germany do not qualify for the credit, while those built in Chattanooga, Tennessee, do. It is essential to carefully consider these factors when determining the eligibility of a specific vehicle for the tax credit.
Thinking of Used: There is a credit for buying a used EV
If you purchase a used electric vehicle from a dealership (the model year 2021 or earlier), you may be eligible for a tax credit of up to $4,000. However, there is a price cap for this credit as the vehicle must cost less than $25,000. In addition, it is worth noting that this credit is only available for used electric vehicles purchased from a dealership and not from an individual seller.
Potentially eligible BEV’s and PHEV’s
– Audi Q5 TFSI e Quattro (PHEV)
– BMW 330e
– BMW X5 xDrive45e
– Ford Escape Plug-In Hybrid
– Ford E-Transit
– Ford F-150 Lightning
– Ford Mustang Mach-E
– Lincoln Aviator Grand Touring
– Lincoln Corsair Grand Touring
– Chevrolet Bolt
– Chevrolet Bolt EUV
– Cadillac Lyriq
– Nissan Leaf S, S Plus, SL Plus, SV and SV Plus
– Rivian R1S– Rivian R1T
– Chrysler Pacifica PHEV
– Jeep Wrangler 4xe, Jeep Grand Cherokee 4xe
– Tesla Model 3 Rear Wheel Drive and Long Range
– Tesla Model Y All-Wheel Drive, Long Range, and Performance
– Volkswagen ID.4, and the ID.4 Pro, Pro S, S, AWD Pro, and AWD Pro S
– Volvo S60 (PHEV), Extended Range and T8 Recharge (Extended Range)
Check the IRS List Here: New Qualified Clean Vehicles
