Buy now to claim the $7,500 federal electric vehicle tax credit before it expires in 2022
If you want to buy a new electric vehicle this year, the rest of this month is likely to be a confusing and tense time.
The House is due to return from recess on Friday and consider the Inflation Reduction Act (IRA), which includes about $370 billion in energy and climate investments. And while much of this is great news – the establishment of our supply chain for the nationwide supply of batteries and many more American-made electric vehicles in the near future – the credit of he revamped EV tax that serves to sweeten the deal for vehicle buyers isn’t going to look so sweet for a little while.
Indeed, by the time President Biden signs the legislation later this month, the old version of the IRS 30D tax code is no longer valid.
2022 Ford F-150 Lightning
The new legislation is drafted without any provisions extending the “old” electric vehicle tax credit to all purchases for the rest of the year. Meanwhile, the IRA legislation sets out stipulations on critical minerals, battery supply, national content thresholds and vehicle assembly that the Treasury Department will need to define before enacting a “new ” 30D for the 2023 tax year.
ZETA, a political and advocacy group representing electric vehicle manufacturers, charging networks, hardware suppliers, battery manufacturers, utilities and all industries making and supporting electric vehicles, does not see this as a quick turnaround. Based on his reading of the bill and conversations with administrators, he does not expect the electric vehicle tax credit to be available to the average consumer until 2023, he confirmed. . Green Car Reports Thursday.
The group estimates the timeline of the bill on its way to the president’s office buys buyers about two weeks from today.
The tax credit disappears for the rest of the year, probably
Contrary to what has been reported elsewhere, there is no special provision to apply retroactively to electric vehicle buyers for the remainder of 2022. Under the revised credit, some vehicles currently eligible for the credit will soon no longer be eligible for the credit. due to new MSRP caps.
2023 Chevrolet Bolt Electric
Essentially, the IRA has killed off part of the market this year so it can thrive in the future – with the addition of a $4,000 credit on used electric vehicles (costing up to $25,000 $), a tax credit of up to $40,000 for “clean utility vehicles, and a significant extension and retroactive extension of the 30C credit that will give households a break on charging equipment.
As we have seen, the lifting of the cap – and an extension of the 30D tax credit to 2032 – will remove the 200,000 vehicle cap allowed for qualifying vehicles from each automaker. That means vehicles from Tesla and GM could be fully eligible, if they can meet supply chain requirements.
Caught in transition
But there is an exception, called the bridging rule, that could help more people claim the credit, albeit in a way that could be a washout based on dealer margins.
As the Bill states (at page 394) in a transitional rule, only taxpayers who “before the date of enactment of this Act” have “purchased or entered into an enforceable written contract for the purchase of a new operator of a motor vehicle” and put into service on or after the passage of the law can still claim the credit as it was defined before its enactment.
This will depend on state rules regarding purchases, which vary somewhat on what is considered legally binding in purchasing a vehicle. In most, if not all, cases, a deposit that also qualifies as a deposit for the final delivery of the vehicle is binding, but a pre-order deposit to queue up is not.
Get ready for a race
That could lead to quite a race over the next week as EV buyers race to finalize their purchase. For startups like Rivian, Lucid, or other EVs with long waiting lists, deposit holders can push to spec vehicles and deposit money.
Then it’s not entirely clear what’s to come at the start of the new year. According to the Alliance for Automotive Innovation, another trade group that represents the vast majority of automakers selling vehicles in the U.S. market, about 70% of electric vehicles currently sold in the U.S. will no longer qualify for the revamped credit at all. as part of the phase -in procurement requirements.
“The $7,500 credit may exist on paper, but no vehicles will qualify for this purchase incentive for the next few years,” Alliance CEO John Bozella said in a recent article. blog. “This is going to be a major setback to our collective goal of 40-50% electric vehicle sales by 2030.”
The Alliance argued that credit requires this supply chain transformation faster than would be possible. “Again, we share the goal of increasing domestic capacity and supply, but the requirements should be an incentive for industry-based change, not inaccessible and punitive to consumers,” Bozella said.
Kia EV6 2022
That’s quite a moot point now. There is effectively no chance that the bill will be significantly changed. Extending the transition rule or making a date change in the bill would likely require another vote. It’s something that Senate Majority Leader Schumer has worked hard to get the votes of the senses. Manchin and Sinema, will likely avoid at all costs, due to continued Republican resistance to the bill, despite bipartisan support for such measures in the polls.
Point of sale to come a year later
The bill also added maximum household income and maximum MSRP requirements for tax credit eligibility. And it offers an additional year for point-of-sale details to be applied, establishing a “credit transfer” set to begin for vehicles put into service after December 31, 2023 that will allow buyers to claim it at the dealership, with dealers acting as intermediaries.
2022 Tesla Lineup (Courtesy of Tesla, Inc.)
It’ll be a more convenient credit, available to more EV buyers, if you consider Tesla Model Y and Model 3 buyers — well over half of the U.S. EV market — becoming eligible again. But that will require a marketing overhaul, an overhaul of car-buying advice and, for some automakers, entire business plans to change.
While its electric vehicle consumption tax credit goals won’t all be achievable overnight, the bill is an important step forward in meeting our shared national climate goals and helping to bolster manufacturing jobs. Americans. pic.twitter.com/NQFYCovdpC
— Melissa Miller (@Meliss1001) August 11, 2022
No company has yet made a full statement about where that leaves the electric vehicle tax credit for the rest of the year. Ford cheered the bill today as it heads into the House, so Green Car Reports reached out on how he sees credit working from now on.
One path to clarity
The tax credit — and peace of mind about whether buyers will be able to claim it — likely won’t return until the Treasury Department confirms how vehicles will be considered eligible or not, early in next year. It might be possible to issue guidance before then, ZETA suggests, but that’s unlikely because the bill stipulates that domestic content and supply chain rules begin to take effect immediately.
People will continue to buy EVs through the end of the year, and that might help some brands catch up with demand. But if you consider the record moment this legislation inadvertently creates, it will be a very confusing time for buyers who have just decided to get an EV.