The federal tax credit for electric vehicles is set to undergo a significant change that will make it more appealing to potential buyers. Starting January 1, the rebate, which can amount to $7,500 for qualifying new EVs and up to $4,000 for qualifying used EVs, will be available at the point of sale, rather than being claimed when filing taxes.
Key Takeaway
Starting January 1, the federal tax credit for electric vehicles will be available at the point of sale, making it more attractive to buyers. However, new restrictions on the components of zero-emission vehicles may limit the number of cars that qualify for the full $7,500 credit. Automakers are responding to these changes by announcing which of their electric vehicles will be eligible for the credit.
More Dealers on Board
More than 7,000 car dealers have already enrolled to ensure they can provide this point-of-sale rebate, representing nearly half of all new car dealerships in the United States.
New Restrictions
However, there’s a caveat: Due to new restrictions coming into effect, there may be a limited number of cars that qualify for the full $7,500 credit in the new year. These restrictions pertain to the components that constitute zero-emission vehicles.
Reimagined Credits
These changes are a result of the reimagining of the credits under President Biden’s Inflation Reduction Act. The negotiation process involved various stakeholders, including U.S. Senator Joe Manchin, and led to a split in the credit. Vehicles can qualify for a $3,500 credit if the automakers adhere to certain guidelines on sourcing battery materials, and an additional $3,500 if they meet similar rules for battery components. Starting in 2024, these sourcing requirements will become more rigorous.
Automakers’ Responses
As a consequence, several automakers have announced which of their electric vehicles will qualify for the full tax credit. General Motors stated that only its Chevy Bolt will be eligible for the complete tax credit, while Ford mentioned that only its F-150 Lightning will qualify for the full $7,500 credit. Tesla, known for its proficiency in identifying and qualifying for clean energy credits and subsidies, also revealed which of its models will be affected.
Looking Ahead
As we approach the new year, more automakers are expected to disclose which of their electric vehicles will qualify for the credit, and the Treasury Department will compile a list on its website. The complexity of building an electric vehicle in a supply chain largely centered around China, as well as the ambiguous motivations behind the guidelines, underscore the uncertainties in the industry.
