The Inflation Reduction Act could help you save more on an electric vehicle — but qualifying for the ev tax credit could also get more complicated.
The economic package, which addresses health care costs, climate change and taxes on corporations, passed in both the Senate and House this week.
As part of this bill, Congress will extend the $7,500 EV tax credits for new electric vehicles, and add a $4,000 tax credit for used electric vehicles. It’s also eliminating a sales cap currently in place, which could allow vehicles from big-name electric automakers like Tesla and Toyota to become eligible again.
But it’s also adding restrictions regarding the car’s price and the buyers’ income, as well as where the parts are produced.
Some industry experts argue that the stricter guidelines around this tax credit will actually reduce EV sales.
If President Biden signs the bill as it stands (and he likely will), this legislation will go into effect next year. The credits will then stay in place through 2032.
What Does the New EV Tax Credit Mean for Car Buyers?
Under the Inflation Reduction Act, consumers can still get a $7,500 tax credit when buying a new electric vehicle. There is also a new element in the legislation that is especially attractive to people who like to buy on a budget. Used electric vehicles will be eligible for a $4,000 tax credit (or 30% of the vehicle’s price, whichever is lower) when the bill goes into effect.
Congress has also eliminated the 200,000 model sales cap currently in place. Right now, once an automaker hits 200,000 new EV sales, its vehicles no longer qualify for the electric vehicle tax credit. As of today, Tesla, General Motors, and Toyota are all disqualified — and Ford isn’t far behind. All these automakers will be back in the game starting next year.
But this new legislation contains a lot more language that can quickly disqualify the car you may want to buy.