What Cars Qualify for a $7,500 Tax Credit From the IRS – NBC Chicago



What Cars Qualify for a $7,500 Tax Credit From the IRS – NBC Chicago

If you’ve been on the market for an electric vehicle, 2023 might be your lucky year as the U.S. Department of Treasury just expanded its list of vehicles eligible for the federal tax subsidy of up to $7,500.

Starting Jan. 1, many Americans were now eligible to qualify for a tax credit of up to $7,500 for buying an electric vehicle. The credit, part of changes enacted in the Inflation Reduction Act, is designed to increase EV sales and reduce greenhouse emissions in the long term.

The new law also provides a smaller credit for people who lease or buy a used EV.

But for at least the first two months of 2023, a complicated list of requirements could make qualifying for the credit difficult to understand.

The new tax credit, which lasts until 2032, is intended to make zero-emission vehicles affordable to more people. Here is a closer look at it.

What’s New for 2023?

The credit of up to $7,500 will be offered to people who buy certain new electric vehicles as well as some plug-in gas-electric hybrids and hydrogen fuel cell vehicles. For people who buy a used vehicle that runs on battery power, a $4,000 credit will be available.

But the question of which vehicles and buyers will qualify for the credits is complicated and will remain uncertain until Treasury issues the proposed rules in March.

What’s known so far is that to qualify for the credit, new EVs must be made in North America. In addition, caps on vehicle prices and buyer incomes are intended to disqualify wealthier buyers.

Starting in March, complex provisions will also govern battery components. Forty percent of battery minerals will have to come from North America or a country with a U.S. free trade agreement or be recycled in North America. (That threshold will eventually go to 80%.)

And 50% of the battery parts will have to be made or assembled in North America, eventually rising to 100%.

Starting in 2025, battery minerals cannot come from a “foreign entity of concern,” mainly China and Russia. Battery parts cannot be sourced in those countries starting in 2024 — a troublesome obstacle for the auto industry because numerous EV metals and parts now come from China.

here also are battery-size requirements.

Which Vehicles Are Eligible?

Because of the many remaining uncertainties, that’s not entirely clear. However, the Treasury Department released an initial list of vehicles that meet the requirements to claim the new clean vehicle tax credit beginning Jan. 1, including models from Chrysler, Ford, Jeep, Lincoln, Nissan and Rivian. More vehicles will be added to the list in the weeks and months to come.

The Energy Department also maintains a list of qualifying EVs.

General Motors and Tesla have the most EVs assembled in North America. Each also makes batteries in the U.S. But because of the requirements for where batteries, minerals and parts must be manufactured, it’s likely that buyers of those vehicles would initially receive only half the tax credit, $3,750. GM says its eligible EVs should qualify for the $3,750 credit by March, with the full credit available in 2025.

Until Treasury issues its rules, though, the requirements governing where minerals and parts must be sourced will be waived. This will allow eligible buyers to receive the full $7,500 tax incentive for qualifying models early in 2023.

Audi

Model Year Vehicle Description MSRP Limit
2023 Audi Q5 TFSI e Quattro (PHEV model) $80,000

BMW

Model Year Vehicle Description MSRP Limit
2021, 2022, 2023 BMW 330e $55,000
2021, 2022, 2023 BMW X5 xDrive45e $80,000

Ford (includes Lincoln)

Model Year Vehicle Description MSRP Limit
2022, 2023 Ford Escape Plug-In Hybrid $80,000
2022, 2023 Ford E-Transit Van $80,000
2022, 2023 Ford F-150 Lightning $80,000
2022, 2023 Ford Mustang MACH E $55,000
2022, 2023 Lincoln Aviator Grand Touring (PHEV model) $80,000
2022, 2023 Lincoln Corsair Grand Touring (PHEV model) $55,000

General Motors (Buick, Cadillac, Chevrolet, and GMC)

Model Year Vehicle Description MSRP Limit
2022, 2023 Chevrolet Bolt $55,000
2022, 2023 Chevrolet Bolt EUV $55,000
2022, 2023 Cadillac Lyriq $55,000*

*Lyriq base price is over the $55k MSRP limit, so unlikely to qualify

Nissan

Model Year Vehicle Description MSRP Limit
2021, 2022, 2023 Nissan Leaf S $55,000
2021, 2022 Nissan Leaf S Plus $55,000
2021, 2022 Nissan Leaf SL Plus $55,000
2021, 2022 Nissan Leaf SV $55,000
2021, 2022, 2023 Nissan Leaf SV Plus $55,000

Rivian

Model Year Vehicle Description MSRP Limit
2022, 2023 Rivian R1S  $80,000*
2022, 2023 Rivian R1T  $80,000*

Stellantis (includes Chrysler, Jeep)

Model Year Vehicle Description MSRP Limit
2022, 2023 Chrysler Pacifica PHEV $80,000
2022, 2023 Jeep Wrangler 4xe $80,000
2022, 2023 Jeep Grand Cherokee 4xe $80,000

Tesla

Model Year Vehicle Description MSRP Limit
2022, 2023 Tesla Model 3 Rear Wheel Drive (Order here) $55,000
2022, 2023 Tesla Model 3 Long Range (Order here) $55,000
2022, 2023 Tesla Model Y All-Wheel Drive – 7 seat (Order here) $80,000*
2022, 2023 Tesla Model Y Long Range – 7 seat (Order here) $80,000*
2022, 2023 Tesla Model Y Performance – 7 seat (Order here) $80,000*
2022, 2023 Tesla Model Y All-Wheel Drive – 5 seat (Order here) $55,000
2022, 2023 Tesla Model Y Long Range – 5 seat (Order here) $55,000
2022, 2023 Tesla Model Y Performance – 5 seat (Order here) $55,000

*Model Y only qualifies for $80k MSRP limit with third row, 7-seat option

Volkswagen

Model Year Vehicle Description MSRP Limit
2023* Volkswagen ID.4 $55,000
2023* Volkswagen ID.4 Pro $55,000
2023* Volkswagen ID.4 Pro S $55,000
2023* Volkswagen ID.4 S $55,000
2023* Volkswagen ID.4 AWD Pro $80,000**
2023* Volkswagen ID.4 AWD Pro S $80,000**

Volvo

Model Year Vehicle Description MSRP Limit
2022 Volvo S60 (PHEV) $55,000
2022 Volvo S60 Extended Range $55,000
2023 Volvo S60 T8 Recharge (Extended Range) $55,000

Some vehicle brands might be missing because they have yet to submit a list of possible models to the IRS.

What About Price?

To qualify, new electric sedans cannot have a sticker price above $55,000. Pickup trucks, SUVs and vans can’t be over $80,000. This will disqualify two higher-priced Tesla models. Though Tesla’s top sellers, the models 3 and Y, will be eligible, with options, those vehicles might exceed the price limits.

Kelley Blue Book says the average EV now costs over $65,000, though lower-priced models are coming.

Will I Qualify for the Credits?

It depends on your income. For new EVs, buyers cannot have an adjusted gross income above $150,000 if single, $300,000 if filing jointly and $225,000 if head of a household.

For used EVs, buyers cannot earn more than $75,000 if single, $150,000 if filing jointly and $112,500 if head of household.

How Will the Credit Be Paid?

At first, it will be applied to your 2023 tax return, which you file in 2024. Starting in 2024, consumers can transfer the credit to a dealership to lower the vehicle price at purchase.

Will the Credits Boost EV Sales?

Yes, but it probably will take a few years, says Mike Fiske, associate director for S&P Global Mobility. The credit may cause a bump in sales early next year because of Treasury’s delay in issuing the stricter requirements. But most automakers are now selling all the EVs they build and cannot make more because of shortages of parts, including computer chips.

And automakers may have trouble certifying the sources of battery minerals and parts, a requirement for buyers to receive the full credit. Automakers have been scrambling to move more EV supply chains to the U.S.

How Does the Used-Ev Credit Work?

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. But the used EV must cost less than $25,000 — a tall order given the starting prices for most EVs on the market. A search on Autotrader.com shows that the Chevy Bolt, the Nissan Leaf and other relatively economical used EVs are listed at $26,000 or more for models dating back to 2019.

On the other hand, used EVs need not be made in North America or comply with the battery-sourcing requirements. That means that, for instance, a 2022 Kia EV6 that’s ineligible for the new-vehicle credit because it’s made in South Korea can qualify for a used-car credit if its price falls below $25,000.

“The real effects where these tax credits will have a big impact will be in the 2026-to-2032 period — a few years into the future — as automakers gear up and volumes increase,” said Chris Harto, a senior policy analyst for Consumer Reports magazine.

Why Is the Government Offering the Credits?

The credits are part of roughly $370 billion in spending on clean energy — America’s largest investment to fight climate change — that was signed into law in August by President Joe Biden. EVs now make up about 5% of U.S. new-vehicle sales; Biden has set a goal of 50% by 2030.

Sales of EVs have been climbing, particularly as California and other states have moved to phase out gas-powered cars. The rise of lower-cost competitors to Tesla, such as the Chevy Equinox, with an expected base price of around $30,000, are expected to broaden the EVs’ reach to middle-class households. S&P Global Mobility expects EVs’ share of auto sales to reach 8% next year, 15% by 2025 and 37% by 2030.

Could Requirements Be Eased to Make More EVs Eligible?

It appears that may happen. Some U.S. allies are upset over North American manufacturing requirements that disqualify EVs made in Europe or South Korea.

The requirements knock Hyundai and Kia out of the credits, at least in the short term. They plan to build new EV and battery plants in Georgia, but those won’t open until 2025. European Union countries fear that the tax credits could make their automakers move factories to the U.S.

There is a loophole, however. The law appears to exempt commercial vehicles from the North America assembly and domestic battery mineral and parts requirements. That means that rental car and leasing companies with huge fleets as well as EVs used fuller-time for ride-share such as Uber and Lyft could be eligible for up to $7,500 in tax credits even for foreign-made EVs. A fact sheet released by Treasury on Thursday affirms it would allow exemptions for commercial vehicles, which the department says it must do based on the wording of the law.

That move drew the anger of Manchin, a key vote in passing the Inflation Reduction Act, who on Thursday accused the Biden administration of bending to the desires of foreign countries. He said the exemptions undermine the law’s intent to “bring our energy and manufacturing supply chains onshore to protect our national security, reduce our dependence on foreign adversaries and create jobs right here in the United States.”

Manchin said he would introduce legislation in the coming weeks that “prevents this dangerous interpretation from Treasury from moving forward.”

Are There Credits for Charging Stations?

If you install an EV charger at home, credits may be available. The new law revives a federal tax credit that had expired in 2021; it provides 30% of the cost of hardware and installation, up to $1,000. It adds a requirement that the charger must be in a low-income or non-urban area. Businesses that install new EV chargers in those areas can receive tax credits of as much as 30% — up to $100,000 per charger.

Residential EV chargers can range in cost from $200 to $1,000; installation can add several more hundred dollars.

So Should I Buy Now or Wait?

That’s entirely a personal decision.

If you’ve grown tired of volatile gasoline prices and are considering an EV, you might want to go ahead. Buying a qualifying EV in January or February could net you the full $7,500 tax break before more stringent requirements take effect in March. Additional state credits also may be available.

But if you’re still on the fence, there’s no urgency. Consumers who rush to buy now, when relatively few qualifying EVs are available, may face dealer price markups. Within a few years, technology will improve, and more EVs will qualify for full credits.

Where Can I Find More Information?

The Treasury Department on Thursday released several frequently asked questions documents for individual and commercial customers on the clean vehicle tax credits meant to help them understand how to access the various tax incentives.

The department also released a white paper explaining the anticipated direction that it is taking ahead of the proposed rule rollout.


Soruce : https://www.nbcchicago.com/news/national-international/buying-an-electric-car-in-2023-heres-how-you-can-get-a-7500-tax-credit/3045452/

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