The $7,500 tax credit for electric vehicles (EVs) may become harder to obtain starting in March.
The Inflation Reduction Act, a climate law signed by President Biden in August, altered the requirements for the existing tax credit for clean vehicles. The law extended the tax break through 2031, but also made it more difficult to qualify for the full $7,500 value of the credit.
Some experts in the field of taxes and automobiles believe that the new changes, which aim to bring more manufacturing and supply chains to the US and its allies, will make it temporarily more difficult to meet the requirements for receiving all or part of the credit.
Some of the tax credit rules went into effect on January 1st, but others, pertaining to battery minerals and components, don’t take effect until the IRS issues guidance. Experts predict that in March 2023, the agency will implement changes that make it harder for certain clean vehicles to qualify for the tax break. This may be the case until manufacturers are able to comply with the new rules. As a result, consumers who are considering purchasing an electric car, truck, or SUV may have a limited window in which they can take advantage of the tax break.
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Manufacturers have identified 27 all-electric and 12 plug-in hybrid car and truck models that qualify for the tax break based on existing rules, according to IRS data as of January 17. Experts anticipate that the new regulations, which aim to increase domestic and allied manufacturing and supply chains, will make it more difficult for individuals to qualify for the tax credit on electric vehicles temporarily.
The IRS is expected to release further guidance on the matter in March 2023, which may result in a reduction of the current list of eligible vehicle models. However, consumers may still be able to claim the tax credit by purchasing a used electric vehicle, leasing a car, or meeting certain income requirements. Some car manufacturers, like Tesla, have lowered prices on certain models in anticipation of these changes.
The clean vehicle credit is a type of tax credit that is non-refundable, which means it can only be claimed if the individual has a minimum annual federal tax liability of $7,500 and if the electric or fuel-cell vehicle is used after December 31st, 2022.
In conclusion, the $7,500 tax credit for EVs may become harder to obtain starting in March due to the Inflation Reduction Act. Manufacturers have identified 27 all-electric and 12 plug-in hybrid car and truck models that qualify for the tax break based on existing rules, but that number is expected to shrink after the IRS issues guidance in March 2023. Experts have noted that individuals shopping for a new electric vehicle, such as a car, truck, or SUV, probably have a restricted time frame in which they can easily claim the tax credit.
