As the new year begins, many popular electric cars, especially some Tesla and General Motors models, may qualify for a $7,500 discount. the tax credit they are not eligible for in 2022. But that eligibility may only last a few months.
This is because New tax limits enacted in August as part of the Inflation Reduction Act will not go into effect all at once, the Treasury Department announced this week. This means that the laws will, for a temporary period, be more generous, allowing higher taxes on most electric vehicles, for the first few months of the new year.
The US Treasury Department, which implements the rules, recently announced rules for some new restrictions on tax credits – including where the car’s trunk is installed and where it came from. minerals that were used – it is postponed until at least March of 2023, when the proposed rules will be published about that part of the requirements. According to the language in the law, however, only the publication of the “proposed guidance” about these laws, which the Ministry of Finance said will happen in March, will quickly create debt reduction. But some of the new rules are being enforced as originally scheduled in January. That leaves a window of about three months in which some vehicles can qualify for higher tax credits than they last qualified for. there.
General Motors, for example, it has already said that once the full limits are enforced – whenever that happens – its electric cars will only be good for a $3,750 tax credit. It is expected to be two or three years before GM vehicles will again qualify for the full $7,500 tax credit, the company said. In order to qualify for the higher level of credit before March, a car must be delivered to the customer before doing so, according to the guidelines of the Ministry of Finance. That can reduce the window of time, especially for popular models where customers are waiting.
While that could provide a buying opportunity in the first months of the year, the downside is that it adds confusion to what is already a confusing set of rules – even in terms of tax regulation.
“I was hoping for more clarity, not less,” said Chris Harto, a parent. research policies and Consumer Reports. “It seems like they seem more confused every time they say something.”
In fact, the tax laws are designed to encourage automakers to make their electric cars and all parts of those cars, as much as possible, within the United States, or in countries where US markets exist. It is also designed so that the tax credit does not go to wealthy Americans who buy expensive cars. The latest announcement, which will temporarily unlock more tax credits, is likely mostly a good thing for customers.
The reverse tax credit at the beginning of the year is just one of the complications.
Under the new EV credit law, the Chevrolet Bolt EV and EUV are eligible for tax credits next year. They were not eligible before because, although they are being built in North America – one of the requirements under the new rules – General Motors, Chevrolet’s parent company, and Tesla have already sold more than 200,000 hybrid vehicles. That is the limit for any producer under the tax credit requirement. The new law, enacted as part of the Inflation Reduction Act, eliminates that limit, though.
However, not all buyers and not all electric vehicles will qualify for the credit. For example, apart from the requirement that the car must be built in North America, there will also be restrictions on its price. If it’s an SUV, van, or pickup, its sticker price must not exceed $80,000 and, if it’s a car, it can’t exceed $55,000.
These prices will be based on the entire vehicle’s Manufacturers Suggested Retail Price (MSRP), or installed price, including all factory installed options. If the seller bids more for the car, whether there is a discount or a rebate, it doesn’t matter. Eligibility for rebate is based on actual MSRP only.
As a result, most Tesla models, including the Model X SUV and the Model S sedan and even the Model 3, as currently priced on Tesla’s website, will not be eligible for tax credits. And the Mercedes EQS SUV, which is assembled in the United States and is currently eligible for tax credits, according to an IRS website, will not be eligible next year.
“The criteria for who qualifies will be floated, and then the floor will be crossed again when the guidelines come out (in March),” Harto said. . “And it’s just going to create a lot of trouble for consumers, and drivers, and shoppers.”
In addition, rotation is not allowed. The person who buys the vehicle must be the end user. If you’re buying the car only to resell it to someone else, you can’t claim the credit.
There are also limits on the customer’s income. A consumer cannot have a “modified gross income” of more than $150,000 for an individual, $300,000 for a couple filing jointly, or $225,000 for a single parent. one of a family. These restrictions will prevent many electric car buyers from receiving tax credits.
The best thing car buyers can do is ask if the particular car they’re buying qualifies for a tax credit, said Andrew Koblenz, vice president for legal and regulatory affairs at National Automobile. Dealers Association. Some car models are made at more than one factory, so two electric SUVs that look the same on the same dealership may not all qualify or may not. eligible for the same amount of credit.
“It’s a good time to buy. It’s great that many cars are eligible now but you have to make sure that the car you like is eligible,” said Koblenz. “You have to ask your dealer and your manufacturer that question and you have to make sure you’re qualified as well.”