What does the Inflation Reduction Act impact on EVs?
The Inflation Reduction Act (IRV) of 2022, which was signed into law on August 16, 2022 is perhaps the most significant legislation to accelerate an electrified future in the automotive industry.
It's a federal investment in clean energy technologies that will offers incentives for consumers to purchase an EV.
Inflation Reduction Act Incentive Summary
EV Tax Credit For New Vehicles
EV Tax Credit For Used Vehicles
EV Tax Credit For Used Vehicles
- Federal tax credit for EVs will remain at $7,500 with no manufacturer caps
- Dealerships can soon apply for credit at time of sale
- Only sedans under $55,000 or SUVs, vans, and pickup trucks under $80,000 are eligible for the credit
EV Tax Credit For Used Vehicles
EV Tax Credit For Used Vehicles
EV Tax Credit For Used Vehicles
- Tax credit of 30% of value of used EV with $4,000 cap
- Must be purchased at a dealerships and they can apply for credit at time of sale
- Used vehicle price must be $25k or less AND at least 2 years old
EV Charger Credit
EV Tax Credit For Used Vehicles
EV Charger Credit
- Tax credit covers 30% (up to $1,000 per unit) of the cost of the equipment for individual uses
- Tax credit covers 6% (up to $100,000 per unit) of the cost of the equipment for commercial uses
- Bidirectional charging equipment is eligible
Frequently Asked Questions
Please reach us at ask@federevcredit.org.com if you cannot find an answer to your question.
It already did! The new Tax Credit applies for EVs purchased beginning January 1, 2023
The US Department of Energy offers a VIN decoder tool to identify where a given EV was assemble. Click Here
Manufactures will announce this and the government will offer some guidance.
Yes, however in additional to any federal credit you may or may not qualify for, there are a number of regulations, and funding opportunities available at the state level.
For example, in the state of Massachusetts, drivers can qualify for a $1,500 - $3,500 rebate under the Massachusetts Offers Rebate for Electric Vehicles (MOR-EV) program.
Yes. Starting January 1, 2024, a taxpayer may elect to transfer the credit to a dealer, which will enable buyers to receive the credit as a rebate at the point of sale.
This manufacturer has entered into a written agreement with us to become a "qualified manufacturer" but hasn't yet submitted a list of specific makes and models that are eligible. Please check back here for updated information.
Yes, the tax credit cap for automakers after they hit 200,000 EVs sold is eliminated, making GM, Tesla and Toyota once again eligible.
This manufacturer has entered into a written agreement with us to become a "qualified manufacturer" but hasn't yet submitted a list of specific makes and models that are eligible. Please check back here for updated information.
NO. Don't try and outsmart the IRS. The credit limitations on the price of the vehicle are based on manufacturer's suggested retail price (MSRP), not the actual price you paid for the vehicle. IRS
A seller must provide the following information on a report to the taxpayer and to the IRS:
- Name and taxpayer identification number of the seller
- Name and taxpayer identification number of the taxpayer
- Vehicle identification number of the new clean vehicle
- Battery capacity of the new clean vehicle
- Verification that the taxpayer is the original user of the new clean vehicle
- The date of the sale and the sales price of the vehicle
- Maximum credit allowable for the new clean vehicle being sold
- For sales after December 31, 2023, the amount of any transfer credit applied to purchase
- A declaration under penalties of perjury from the seller
For further details see Revenue Procedure 2022-42.
The seller must provide the report to the taxpayer not later than the date the vehicle is purchased. For further details see Revenue Procedure 2022-42.
For vehicle sales occurring in calendar year 2023 and later, sellers must file reports within 15 days after the end of the calendar year, in a format and method that the IRS provides. For further details see Revenue Procedure 2022-42.
Yes. You may not claim the credit if your modified adjusted gross income (AGI) exceeds certain thresholds. This limitation is based on the lesser of your modified AGI for the year that the new clean vehicle was placed in service or for the preceding year. The relevant modified AGI thresholds are as follows:
- Married filing jointly or filing as a qualifying surviving spouse or a qualifying widow(er) - $300,000
- Head of household - $225,000
- All other taxpayers - $150,000
Your modified AGI is the amount from line 11 of your Form 1040 plus:
- Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income.
- Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa.
The manufacturer's suggested retail price (MSRP) for the new clean vehicle may not exceed the following amounts for the following vehicle types:
- Vans - $80,000
- Sport Utility Vehicles - $80,000
- Pickup Trucks - $80,000
- Other - $55,000
If the MSRP exceeds the limitation for that specific vehicle type, that vehicle is not eligible for the new clean vehicle credit.
The MSRP for this purpose is the base retail price suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges or optional items added by the dealer, or taxes and fees.
The Clean Vehicle Qualified Manufacturer Requirements contain a list of eligible clean vehicles, including fuel cell vehicles, that qualified manufacturers have indicated to the IRS meet the requirements to claim the new clean vehicle credit beginning January 1, 2023.
The details on this are still very unclear and confusing: it seems that leased vehicles may not have to meet the final assembly, price, or income requirements, per a Treasury Department spokesperson who spoke with Consumer Reports. That would mean, for example, that a Kia EV6 or a Hyundai Ioniq 5 (both of which are assembled outside of North America) would qualify for nothing if you purchase but $7,500 if you lease – but those $7,500 would go to the manufacturer, who would hopefully pass on the full value to the consumer.
Consumers can receive tax credits of up to $4,000 — or 30% of the vehicle price, whichever is less — for buying EVs that are at least two years old.
And, of course, with some lovely restrictions.
Beginning January 1, 2023, if you buy a qualified used electric vehicle (EV) or fuel cell vehicle (FCV) from a licensed dealer (A.K.A. a car dealership) for $25,000 or less, you may be eligible for a used clean vehicle tax credit (also referred to as a previously owned clean vehicle credit). The credit equals 30% percent of the sale price up to a maximum credit of $4,000.
The credit is nonrefundable, so you can't get back more on the credit than you owe in taxes. You can't apply any excess credit to future tax years.
You may qualify for a credit for buying a previously owned, qualified plug-in electric vehicle (EV) or fuel cell vehicle (FCV), including cars and light trucks, under Internal Revenue Code Section 25E.
To qualify, you must:
- Be an individual who bought the vehicle for use and not for resale
- Not be the original owner
- Not be claimed as a dependent on another person’s tax return
- Not have claimed another used clean vehicle credit in the 3 years before the purchase date
In addition, your modified adjusted gross income (AGI) may not exceed:
- $150,000 for married filing jointly or a surviving spouse
- $112,500 for heads of households
- $75,000 for all other filers
You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. If your income is below the threshold for 1 of the two years, you can claim the credit.
Keep in mind - This rule may provide some bargaining power, allowing you to negotiate a used electric car that may be above the $25,000 cap in order to be eligible for the credit. If you have trade in, then it's even easier to purchase a used electric car that may be priced above the $25,000 cap.
Furthermore, you won't be able to buy a car from a private party and qualify for the used car tax credit. So the car must be purchased at an actual car dealership.
Used electric cars do not need to be manufactured somewhere in North America or comply with the confusing battery-sourcing requirements. That means that, for example, a 2019 Hyundai Ioniq Electric that's ineligible for the new-vehicle credit (because it's manufactured in South Korea) could possibly qualify for a used-car credit if its price falls below $25,000 cap.
Complete Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles and New Clean Vehicles), and file it with your tax return for the year you took possession of the vehicle to claim the used clean vehicle credit. You will need to include the vehicle identification number (VIN) on the form.
No. Hopefully, the Ionic 5 will be eligible again. Even though the Ioniq 5 was previously eligible for a $7,500 tax credit, the recently passed Inflation Reduction Act has removed EVs assembled outside of North America from the program. Even though the Hyundai Ioniq 5 won’t be eligible for a tax credit, it’s still an EV worth checking out. Check out the Hyundai Ionic 5 here.
Yes, this is real news and Hyundai Motor Group will slowly begin to dominate the EV market while becoming a leader in electric mobility in the U.S. market.
Yes, however automakers are now selling all the EVs they build and cannot make more because of shortages of parts, including computer chips.
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