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A federal EV program can save you thousands. How does it work and how do you apply? | Shareable Stories

8 months ago
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Electric vehicles are typically considered expensive vehicles to own. But the latest federal tax program, designed to make them more affordable, can credit up to $7,500 toward the purchase of a new clean car.

Throughout January, the government has been fine-tuning the details of its new EV tax credit program, just as many Americans are heading into tax season. Some of the new changes enacted by passage of the Reinforced Inflation Act broaden the scope of eligibility, allowing more buyers and lenders to qualify for some tax credit.

For example, from 2023, people who purchase a used car will also receive a reduced credit amount.

As program requirements evolve, understanding whether your vehicle qualifies for credit under the program and how much you can receive can be complicated.

Get answers to your EV tax program questions, including why the EV tax program was introduced, what’s new for 2023, and how to claim the clean car tax credit.

What is its purpose?

When President Joe Biden passed the IRA bill in August 2022, he didn’t just target higher inflation. According to the White House, he has also signed various programs to encourage Americans to make sustainable living choices and reduce energy costs, including electric vehicle owners.

Keith Barry, automotive writer for Consumer Reports, said the new federal EV credit program also aims to make buying a cleaner car more affordable for the average consumer. increase.

“The way the tax credit is designed, it appears to be aimed at stimulating sales of North American-made vehicles and stimulating sales of affordable EVs,” Barry said.

The bill specifically required that all vehicles must undergo “final assembly” in North America. It also removed his 200,000 vehicle cap for manufacturers that were previously ineligible for the credit, and some Tesla, General Motors, and Toyota models were eligible for tax breaks.

However, some sourcing requirements remain unclear, such as rules for critical minerals and battery components. The Ministry of Finance, which oversees tax administration, said it would release additional information in March.






Workers assemble an R1T truck at the Rivian electric vehicle plant in Normal, Illinois, Monday, April 11, 2022. (Brian Cassella/Chicago Tribune/TNS)




New for 2023

For the first time, pre-owned electric vehicles are eligible for a credit of up to $4,000 or 30% of the final sale price, whichever is lower.

Additionally, used EVs do not have to be manufactured in North America, bypassing final assembly rules. However, according to the IRS, it should sell for $25,000 or less.

There are also spending requirements for new cars purchased in 2023. Most cars cannot exceed $55,000, and vans, pickup trucks, and sport EVs cannot exceed $80,000.

“The rules here exclude some of the most expensive vehicles from the tax credit and some of the wealthiest buyers from the tax credit,” Barry said.

New for 2023 is also the income requirement. For a new EV, the purchaser cannot exceed his $150,000 if single, his $225,000 if head of household, or his $300,000 if married.

For used EVs, the income threshold is even lower. The purchaser cannot earn more than $75,000 if he is single, $112,500 if he is head of household, and $150,000 if he is jointly applying.

If these requirements seem restrictive, there is another way to get around the production and income requirements — by leasing an EV. You can get The lender decides whether the deduction reaches the consumer.

Chris Harto, senior policy analyst at Consumer Reports, said in an email that leasing companies can offer the credit as a lump sum payment or as monthly reductions over the life of the loan.

“They have no legal obligation to transfer the credit, but hopefully competition in the market will encourage them to do so,” he said.

Which cars are covered?

The IRS has published a list of eligible new car manufacturers to purchase in 2023.

The index includes 13 manufacturers, including Honda, Volkswagen, Ford Motors, Kia, Rivian and Subaru. Some automakers have listed specific models and years, while others have yet to submit eligible makes.

How to apply:

According to the IRS, you can claim the deduction by completing Form 8936 on your tax return. This form requires you to report the vehicle identification number of the vehicle in question.

Barry noted that this process could become easier in 2024 as requirements become clearer. From 2024, buyers will be able to transfer credit to dealers “at the point of sale,” according to the Treasury Department, which will directly reduce the price of the car.

“(2023) is the year of transition,” he said. “Next year things will be more resolved and people will be able to get that credit at the point of sale, which will make things a lot easier.”

Details will be finalized in the months to come, so you might be tempted to buy an EV right away. If you already have a car you’re interested in, it might be wise to finalize your purchase before March.

Barry recommends consulting a tax professional or accountant rather than a car dealer if you have questions about how credit works.

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