Why EV Tax Credits Can Be A Serious Headache

People who earn $150,000 or less taxable income per year are eligible for the new EV tax credit under the Inflation Reduction Act. If you’re married, you will qualify if you have a joint taxable income of $300,000 or less per year (via Market Watch). However, if you are to qualify for a used EV tax incentive, the minimum entry is capped at half the new EV tax credit income. To put it into perspective, a prerequisite annual taxable income of not more than $75,000 as an individual and $150,000 or less for married partners with a joint tax filing.

Beyond that, brand new electric sedans that will be eligible for the tax cut should have a price tag that doesn’t exceed $55,000. But if you’re buying an SUV, a pickup truck, or a van, it should cost $80,000 or less to be considered for the tax reduction. On the bright side, there is no limit to how many EVs an automaker can sell to be ruled out. This means Tesla, Toyota, and GM, who were locked out of the previous federal tax credit laws after selling over 200,000 EVs, will be eligible for tax incentives under the Inflation Reduction Act.

But the Treasury Department clarifies that most of the new requirement that considers the taxable income and EV price tag and removes the vehicle sales limit won’t come into effect until January 1, 2023. This means that the only additional criterion that needs to be met right now is that the EV needs to be assembled or manufactured in North America. The only exception is if you signed a written agreement with a manufacturer before August 16 to buy an electric car, but it has not yet been delivered.