Electric Vehicle Credits and Incentives

In 2010, electric vehicle tax credit traction skyrocketed, and current incentives will not stop until the end of the decade. Early in the process, incentives took the form of purchase rebates, tax exemptions, and credits with plenty of perks, including waivers from public tolls and parking fees. World leaders are following the United States and have begun their own form of EV development.

China, Norway, and the Netherlands are the countries adding electric vehicle technologies the fastest. Exponential growth is transforming the automotive sector faster than most experts realize. EV sales are expected to dominate the global automotive sector by decade's end.

The 2024 electric vehicle tax credits have undergone significant changes to serve buyers of new and used EVs. For new EV buyers, the potential credit has increased to a maximum of $7500, while those purchasing used EVs may receive a credit of up to $4000. These non-refundable tax credits are designed to reduce tax liability by a corresponding amount on the buyer's income tax. It's important to note that they do not result in a refund for any excess credit. (you won’t see a check in the mail)

How the Tax Credits Work

New for 2024, EV buyers can now exercise greater control over their tax credits. They have the option to transfer the non-refundable credit to their current returns or reassign the incentive to a participating dealership, effectively lowering the sales price for the new or used EV at the point of sale.

And you thought this process was going to be easy. To qualify for any of the credits, buyers must have income below certain thresholds, and any vehicle you plan to purchase must meet certain IRS thresholds.

Who Qualifies?

The Inflation Reduction Act changed the rules for credits purchased from 2023 to 2032. If you are a fearless taxpayer, head to the Internal Revenue Code Section 30D for the latest information on the latest incentives. Credits are available to individuals and businesses.

Vehicles must be used for their own use and not for resale.
Vehicles should be used primarily in the US.

Adjusted gross income should not exceed the following:

For married couples filing jointly or a surviving spouse, income cannot exceed $300,000.
$225,000 for heads of households.
For all other filers, the limit is $150,000.

Directly from the IRS:

You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. You can claim the credit if your modified AGI (adjusted gross income) is below the threshold in 1 of the 2 years.

If you do not transfer the credit, it is nonrefundable when you file your taxes, 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.”

Among the many other requirements, the MSRP (manufacturer’s suggested retail price) cannot exceed:

$80,000 for vans, SUVs, and pickup trucks
$55,000 for sedans, wagons, or hatchbacks

Phase Out

At the start of 2024, tax credits became available as a point-of-sale discount, worth up to $7500 at qualifying dealerships.

Tax credits are part of the Inflation Reduction Act of 2022, which is also designed to address climate change, healthcare, and additional taxes. Electric Vehicles must be manufactured in the United States and below the above-mentioned thresholds.

Use the taxpayer tool set up by the IRS for customers to cut through the excessive amount of noise about available EV credits and incentives. FuelEconomy.com offers the most up-to-date information on eligible vehicles and current incentives.

Buyers must have the latest information when purchasing their electric vehicle or lose out on a large sum of money. According to the Fuel Economy webpage, credits depend on several factors, such as the MSRP, final assembly location, and modified adjusted gross income. The EV's battery does not get a pass on the credits; specific battery components and critical mineral sourcing must be determined.

State Incentives

Never forget the state incentives for the electric vehicle of your choice. The Alternative Fuels Data Center is an invaluable resource for prospective EV purchasers. Click on your state residence and a wealth of information will be displayed, such as state laws and incentives, utility and private incentives, and endless laws and regulations.

Qualifying Vehicles

Every prospective EV buyer asks what cars and trucks qualify for the tax credits. The short answer is that few models qualify for the full $7,500 credit. Some models qualify for half the credits, and some do not.

The list of eligible vehicles continues to be updated regularly. This is due to the battery sourcing materials and critical mineral requirements. The complex new rules require that a certain percentage of source materials come from US-based companies or their trade partners.

EV automakers continue to grapple with battery minerals when building their vehicles. To be eligible for the $3750 tax credit, companies in the United States or their subsidiaries must extract or process a certain percentage of minerals contained in the battery.

EV battery designs use a significant amount of critical minerals, specifically lithium, manganese, nickel, cobalt, and graphite. Dramatically increasing purchases and global production of electric vehicles with these battery designs may lead to increasing demand for these minerals.

The percentage of critical battery minerals in 2024 is 50 percent. In 2025, it will be 60 percent, and in 2026, it will rise to 70 percent. Beginning in 2027, the applicable percentage rises to 80 percent.

Any Tax credits and incentives available to EV buyers depend on where the specific EV is built and assembled, where the battery components and minerals are delivered, and how much they cost. Restrictions may not apply if the electric vehicle is leased rather than purchased.

Follow this link for the most up-to-date Treasury information on eligible vehicles and battery components.

Research is the key to getting the right deal on an Electric Vehicle. Again, follow the provided links to make sure the vehicle you want is still on the list of cars offering credits. Yahoo Finance reports seven vehicles have fallen off the list due to batteries made in China, even if they are the same make and model.

Future of EV Tax Credits

The Inflation Reduction Act says the tax credits will be in place until 2032. From 2024, the credits will be expanded and modified, and taxpayers will be given more flexibility in applying them. Fewer cars are expected to qualify, and battery restrictions are expected to be tightened.

The White House has softened its approach to battery restrictions for the next two years because of the amount of Chinese graphite in EV batteries. However, stringent supply chain issues are expected to kick in after 2026.

Drive to Zero

Thirty-three countries are members of the global pact to accelerate the decarbonization of commercial vehicles through groundbreaking research and education. The Drive to Zero agreement is for tractor-trailers, buses, and box trucks within the member countries for 100 percent zero emissions by 2040.