With the transition to new, tougher-to-meet, and confusing tax credits for electric vehicles (EV), it can be a head-scratcher waiting for more guidance from automakers and the federal government. President Joe Biden signed the Inflation Reduction Act into law August 16, 2022, triggering a shift from the old $7,500 EV tax credit to a new, more complicated one designed to incentivize domestic EV production, reduce reliance on foreign supply chains, and prevent wealthy buyers from getting a discount. The revised federal income tax credit for electric vehicle purchases that took effect August 16, 2022, combined with the state EV rebate that took effect July 1, 2022, could reduce as much as $11,500 from the price of a qualifying electric vehicle, if you can successfully navigate the regulatory maze. Revised Income Tax Credit Until August 16, 2022, a $7,500 federal income tax credit was available to anyone purchasing a fully electric vehicle, provided that the manufacturer of the vehicle had sold fewer than 200,000 EVs. Upon crossing the 200,000 sale threshold, the credit began to phase out (GM and Tesla). The Inflation Reduction Act creates a series of changes to the federal tax credit designed to promote American-made and sourced EVs. Ironically, the first change under the Inflation Reduction Act took effect August 16, 2022, and will actually reduce the pool of vehicles for which the federal credit will be available. Starting August 16, 2022, the credit will be available only for purchases of EVs where the final assembly occurred in North America. The Department of Energy maintains a list of Model Year 2022 and early Model Year 2023 electric vehicles that likely meet the final assembly requirement (afdc.energy.gov). The key word is “likely.” Some vehicles on the list are assembled at different factories in different parts of the world, some in North America and some not. The best way to ensure a purchase qualifies is to use NHTSA’s VIN Decoder (site provided by DOT at nhtsa.gov) to determine whether a vehicle was manufactured in North America. Navigating Revised Federal EV Tax Credit And State EV Rebates 16
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