The New Year is here, and you know what that means, friends. Tax season is right around the corner.
Sorry, we didn’t mean to be rude. But it’s not all bad news, especially if you purchased an electric vehicle in 2022.
As part of President Biden’s $430 billion Inflation Reduction Act, which passed last August, people who purchased an electric vehicle last year are eligible for a tax credit of up to $7,500.
The exact amount you will qualify for, if at all, is a bit confusing, as is nearly everything about the credits. In fact, the Treasury Department will not be releasing its EV tax credit rules until March.
But until then, there are a few things that we do know about the tax credits, including some of the models that will qualify.
Who Qualifies For an EV Tax Credit?
The United States government first began issuing tax credits for hybrid vehicles with The U.S. Energy Policy Act of 2005. This tax-based incentive was expanded to include plug-in electric vehicles with the Energy Improvement and Extension Act of 2008.
The exact specifics for what EVs qualify for the credit, and for how much, as well as the specifications manufacturers have to hit, are seemingly always changing. They are still in flux at the moment, as the rules pertaining to battery components are still being decided upon.
But there are a few things we do know for certain, and the most paramount thing to keep in mind is if you did purchase an EV last year, rather than navigating the complexities of the tax credit alone, talk to an accountant who is well-versed in this field.
From there, here are a few more things to keep in mind about the tax credit.
- The credit will be between $2,500 to $7,500 for new vehicles, depending on the car’s battery capacity and weight limit, amongst other factors.
- About that weight limit: the car must weigh less than 14,000 pounds.
- The credit for used electric vehicles is capped at $4,000.
- At the moment, SUVs, pickups, trucks, and vans that cost more than $80,000 are excluded, as are Sedans that cost more than $55,000. But it’s not impossible that might change.
As explained by Tax Payer Advocate, there are limits based on the adjusted gross income (AGI) thresholds of your household: for single or married taxpayers filing separately, the limit is $150,000. The limit is $225,000 for taxpayers filing as head of household, and that limit is $300,000 for married couples filing jointly or surviving spouse taxpayers.
The credit is non-refundable. This means it might be able to get your bill to zero, but if you, say, owed $4,000 and got the full credit, you would not receive the excess money in the form of a refund. The excess credit will not carry over to next year’s bill, either.
At the moment, cars not manufactured in North America, including those from Kia and Hyundai, are ineligible for the credit, as part of President Biden’s effort to boost the production of American EVs and to make them half of all U.S. auto sales by 2030. Overseas manufacturers are lobbying for this rule to be changed, though it’s unclear to what extent the regulations will get relaxed.
Previously, overseas EVs qualified for the credit, but each automaker was limited to a cap of 200,000 vehicles before they were maxed out.
Getty Images
What Electric Vehicles Qualify For The Credit?
Again, the specifications are still changing, but at the moment, the Biden Administration has indicated that the following EV models are eligible for the tax credit.
Author Profile
- "Lean Right" Bias Rating
- TheStreet is a financial news and financial literacy website. It is a subsidiary of The Arena Group. The company provides both free content and subscription services such as Action Alerts Plus a stock recommendation portfolio co-managed by Bob Lang and Chris Versace.
Latest entries
MoneyJanuary 29, 2023What Is the Internal Revenue Service (IRS)? Definition & History
MoneyJanuary 29, 2023How Economic Data Is Impacting the Stock Market
MoneyJanuary 18, 2023GE Has Been One of the Best Stocks of 2023. Can It Continue?
MoneyJanuary 18, 2023Peloton Has a New Hope In Its Turnaround Battle