Qualifying For EV Tax Credit In 2022
In order to qualify for the tax credit, all of these rules need to be met:
- The car must be new or have been used for fewer than 2 years,
- It must be bought for personal use or commercial business use,
- You should buy it after 12/31/2022,
- It must be registered in your name and at your address.
The most important thing is where the vehicle was made and where its parts come from. This will determine whether or not it qualifies for a tax credit when purchased by an individual after December 31, 2022.
The federal tax credit for buying an electric car or truck has been a major boon for the U.S. auto industry of late. In fact, it’s one of many incentives that have helped drive sales of EVs, which hit a record high in Q1 of 2022.
But now there are concerns that this credit, which can knock thousands off your purchase and has been available since 2009, may not be around much longer for some manufacturers.
What Is The EV Tax Credit 2022?
The EV tax credit is a federal tax credit that can be applied to the purchase of an electric car. In other words, if you buy an electric car and make use of this credit, you’ll only have to pay the difference between what your vehicle costs and the amount paid by the federal tax credit.
For example, if you want to buy a Tesla Model 3 at a cost of $47k, the government would pay $7,500 as part of the EV tax credit. Then you would only pay $39,500 for a Tesla Model 3 or any other EV that qualifies.
Why Are Car Makers Concerned?
What’s interesting here is that carmakers are concerned because they think this could affect sales of certain models. A lot of brands rely heavily on the tax break and many consumers have been waiting until 2022 and 2023 to purchase an eligible vehicle so they can maximize their savings.
They are worried the buyers are likely to consider alternatives if their favorite models aren’t included in the tax credit plan or are removed from eligibility altogether.
They’re also concerned about the future of EV sales and profits. Car manufacturers want to sell as many EVs in 2023 as possible, and it’s likely they will not be able to do so without the tax credit on new vehicles. In fact, they’ve seen the effects of this during Q1 of 2022.
EV Tax Credit: Reasons EV Owners Are Concerned
The $7,500 tax credit can significantly lower the cost of buying an electric car or plug-in hybrid. And since it lowers your effective cost of ownership over time, you can save money on the purchase and long-term use. However, with only a few cars remaining, there’s a lot of concern about whether or not consumers will go electric or stay with combustion engines.
A lowered cost through the tax rebate is a very good incentive, but there are still many cars that are even more affordable. Some analysts expect sales to fall by as much as 50% next year if it carries on like this. Others predict that sales will continue growing even without a federal incentive because they’re already reached a parity price with conventional cars without any government help.
Where the EV Was Assembled
You can only claim the tax credit if your vehicle was assembled in the U.S., Canada, or Mexico.
Where the Battery Components Were Assembled
The battery components can be assembled in the U.S. or any other North American location. They seem very strict about this as it’s thoroughly pointed out in the new rules. No component of the batteries can be assembled on foreign soil.
Where the Battery Materials Came From
The EV battery is made up of three main parts.
- The cells are made from lithium, cobalt, and nickel.
- The cells are assembled into battery packs.
- The battery packs are assembled into modules.
The modules are then placed in the body of a vehicle to make the whole system work together. All materials must be gathered from federally approved locations and sources.
The EV Price
The full amount of your tax credit will be applied if the vehicle you buy costs less than $55,000. As for SUVs and trucks, the cost has to be below $80,000.
The amount of the credit depends on your income level, and you can claim it if you make less than $150,000 per year. If you make more than that, however, you may not qualify for the tax credit at all. You and your spouse may apply together if your joined income is less than $300,000.
EV Car Prices That Qualify for Tax Credit
The electric vehicle tax credit is a $7,500 credit that can be applied to your purchase. Here’s a list of EVs that qualify for this credit:
- Tesla Model 3
- Tesla Model Y
- Cadillac Lyriq
- Chevy Bolt EV
- Chevrolet Bolt EUV
- Ford F-150 Lightning
- Ford Mustang Mach-E
- Ford E-Transit
- Nissan LEAF
- Rivian EDV
- Rivian R1T
- Rivian R1S
Wrapping it Up
In conclusion, the EV tax credit and its limitations are important to know. It is crucial that you understand what qualifies for this incentive before making a purchase.
As we can see, there are plenty of nuances involved in determining whether or not your new car will be eligible for some savings. But the federal tax credit for electric vehicles is alive and well.
It will remain in place through 2022, and then it will begin a new phase beginning in 2023. The federal government has a history of changing the rules on tax credits, so we’re not entirely sure what will happen after 2023.
But as long as you buy an EV before January 1, 2023, you’ll be able to claim the full $7,500 tax credit.
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