What You Need to Know about EV Tax Credits in the New Climate Law

October 21st, 2022 by

The New Climate Law Provides Big Tax Credits for EVs

Let’s just say it: the recent passing of the Inflation Reduction Act was a big deal for everyday homeowners, business owners, and average Americans. The EV Tax Credit Law is set to cut US greenhouse gas emissions by 40% by 2030, save $1.9 trillion on climate-related costs, and put more money into households like yours.

What’s more, if you’ve thought about upgrading to an all-new, stylish electric vehicle, then you’re in luck. Let’s talk about the new EV tax credit law and see how it affects new EV owners!

What Is the New EV Tax Credit Law?

The Inflation Reduction Act was signed into law in August of 2022. It was the largest climate-related bill in US history, without a close second. This legislation allocated around $370 billion to address the climate crisis and closed the federal government’s deficit by over $200 billion annually.

A significant portion of the bill was aimed at offering tax incentives and credits to homeowners, businesses, and others who were interested in switching to clean energy technology. This included a federal tax credit for new electric vehicle (EV) purchases and equipment related to electric vehicles.

Overall, a total of $33 billion of the provisions are set aside for cleaner vehicles and their infrastructure, primarily in the form of tax credits. On top of that, there is another $65 billion for renewable energy and $37 billion for efficient homes. Depending on your circumstances, these may also apply to your EV purchase, so let’s talk about that!

Related: Things to Consider Before Buying an Electric vs. Hybrid Car

How Does the EV Tax Credit Law Apply to New EV Owners?

So, what is the maximum amount I can receive in tax benefits, and is it guaranteed to me? As part of the law, newly purchased electric vehicles and plug-in hybrids can receive up to $7,500 in tax credits upon purchase. That is, as long as the manufacturer hasn’t sold more than 200,000 qualifying vehicles.

Since these tax credits are expected to expire soon, consumers must act quickly on popular EV models. Some exceptions may apply for certain brands as well, such as Toyota’s and GM’s tax credits are already set to expire. On top of that, there are also up to $40,000 in tax credits for newly purchased electric commercial vehicles like tractor trailers. However, this won’t apply to the average user.

Incentives For Charging Stations

It isn’t just the vehicle itself that offers tax incentives. You can also receive up to a 30% rebate upon building a home charging station. Not only that, but business owners can receive the same rebates for installing public EV chargers, even while profiting off of them.

Other Incentives

If you intend to cover the cost of fuel with solar panels or fuel cell storage, then we have great news. Not only will this save you money on your electric bill every month (and, therefore, fuel costs for your vehicle), but you can also receive even more tax breaks.

It wasn’t just a new EV tax credit law but also tax credits for other green energy infrastructure like heat pumps, solar panels, and fuel cells. If you use these at home or at your business, you could receive similar tax credits for installation and potentially more energy credits per kWh produced by your solar panels. Look into your state’s incentives for more information!

Which Cars Qualify?

It’s important to note that not all EVs and hybrids qualify for these incentives. However, many popular EV models do, assuming you buy them before the incentives run out. Here are some of the most popular qualifying vehicles:

  • Nissan Leaf
  • Chevy Bolt
  • Ford F-150 Lightning
  • Rivian RIS/RIT
  • Tesla Model 3/Model Y
  • Tesla Cybertruck
  • Volkswagen ID.4 (2023 models from Tennessee)
  • Ford Mustang Mach 3
  • Cadillac LYRIQ

Others do qualify, so check with your local dealership to see if there’s a specific EV or plug-in hybrid you want.

What About State Incentives?

Depending on the state where you live, you may receive additional tax credits on top of the federal credit when you purchase an EV. Don’t worry, as these incentives are entirely separate and will not conflict with your federal tax credits.

For example, if you purchase an EV and install a new charging station in Massachusetts, you could receive the standard federal rebate on top of a 60% grant for Level 1 and Level 2 chargers (up to $50,000). This makes the investment a no-brainer for businesses and homeowners, as you can profit off of new charging stations in no time!

What If I Can’t Afford an Electric Vehicle?

If you don’t have the money for the upfront costs of a new EV, no problem. There are always financing options available, assuming you have a steady income and decent credit. If you can’t afford the price tag on an eligible vehicle, but you can, with a $7,500 tax credit, find the right financing plan and ensure the vehicle is eligible.

Don’t hesitate to ask questions about financing or tax credits. It should work out in your favor, especially if you live in a state with existing incentives. Still, it doesn’t hurt to double-check!

Learn More: A Step-by-Step Guide to Financing Your Next Car

Is It Worth It?

Overall, buying an EV is entirely worth it. There’s never been a better time to buy an EV, especially if you live in a state with overlapping incentives. You’ll save money upon installation, record-high gas prices, and receive the maximum benefits to the environment and tax credits.

The new EV tax credit law is a game changer for many, so get an EV while you can. From there, stay up to date with our latest automotive news, and don’t hesitate to contact us with any questions or for help finding an EV!

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