EV Tax Credit Qualifications

There's good news for eco-conscious drivers looking to make the switch to an electric vehicle!  The Inflation Reduction Act (IRA) of 2022 introduced tax credits of up to $7,500 for qualified new electric vehicles (EVs) or fuel cell electric vehicles (FCVs) purchased or leased starting in the tax year 2023. While there are stricter vehicle requirements compared to the past, the IRA also expanded the credit for the first time to include certain used EVs, hybrids, and plug-in hybrids. This tax credit is part of a larger push to encourage Americans to adopt cleaner energy options and significantly reduce carbon emissions in the coming years.

A sweet financial perk is waiting for drivers who choose to go electric! The type of EV you buy determines the tax credit you can receive. Once you qualify, this credit directly reduces your federal taxes, putting more money back in your pocket.  As of 2024, there's even an option to take the credit as a rebate at the dealership when you buy the car! The credit amount for brand-new electric vehicles gets interesting. It depends on the specific battery components inside your EV. The raw materials used and how the battery itself is manufactured determine your final credit, which can be up to $7,500. So, choosing an EV with a battery built using certain materials and processes in North America could maximize your credit. Pre-owned electric vehicles also qualify for a tax credit, but it's a bit simpler. Instead of depending on battery specifics, you'll get 30% of the purchase price of the qualifying used EV, capped at $4,000. This can be a significant saving on a pre-owned electric car!

The good news is that the EV tax credit is set to stick around through 2032, thanks to the Inflation Reduction Act (IRA)! Your car must meet a few requirements to qualify for this credit on a new or pre-owned electric vehicle (EV). First, the battery must pack a punch with at least 7 kilowatt-hours (kWh) of storage capacity.  Second, the vehicle must be under 14,000 pounds gross vehicle weight rating (GVWR). There are also some restrictions on the manufacturer, so it needs to be a qualified company to participate in the program. Finally, to be eligible for the credit, the EV must have been finally assembled in North America.  These are just some hoops to jump through, but the potential tax credit of up to $7,500 can be worth it!

There's more to the story than just the car itself when it comes to snagging that EV tax credit. On top of the vehicle meeting specific requirements, there's also a price tag limit depending on what kind of EV you choose. These price caps can change over time to keep up with inflation, so it's always best to check with the IRS or Department of Energy for the latest figures. For brand-new electric SUVs, vans, and trucks, the sticker price can't be higher than $80,000 to qualify for the credit, while all other new EVs are capped at $55,000 MSRP. For pre-owned electric vehicles, the threshold is even lower - the car must be priced at $25,000 or less and sold by a dealer registered with the IRS. But wait, there's one more hurdle! The tax credit also has income limits based on your modified adjusted gross income (AGI), which considers certain deductions like retirement contributions. These limits vary depending on whether you're filing single, head of household, or married filing jointly, and they get adjusted from time to time. For new EVs, the maximum AGI is $300,000 for married couples filing jointly, $225,000 for heads of household, and $150,000 for single filers. Again, these are subject to change, so be sure to check the IRS website for the most up-to-date income limits to see if you qualify for the credit on a new EV. The income limits are even tighter for those buying used EVs, ranging from $75,000 for single filers to $150,000 for married couples filing jointly. It might seem like a lot to juggle, but with a potential credit of up to $7,500, navigating these requirements can be well worth the effort!

There's even more good news for EV shoppers in 2024!  Now, you can claim the credit as a rebate right at Reedman-Toll Subaru of Exton when you buy your new Subaru Solterra EV. This means we can reduce the purchase price by the amount of your credit upfront.  We'll handle all the paperwork with the IRS and get reimbursed for the credit later. This saves you the hassle of filing extra forms and waiting months to see the credit on your tax return.  It's also a great way to ensure you get the full credit you deserve since the credit isn't refundable if your tax bill is lower than the credit amount. Of course, you can still choose to use the credit traditionally by applying it to your taxes the following year.  In that case, you'll need to fill out Form 8936 and submit it with your tax return.

The EV tax credit offers a compelling reason to consider making the switch to an electric vehicle. With the option to claim the credit as a rebate at purchase and Reedman-Toll Subaru of Exton handling all the paperwork, going electric has never been easier. We're thrilled about the future of electric driving and can't wait to get you behind the wheel of a new Subaru EV. We love taking people on test drives and showing off all the features of the Solterra. Ready to experience the excitement of electric driving? Set up your test drive today using the form below!