Understanding Electric Vehicle Tax Credits

As tax filing season approaches, it's important to consider last-minute tax moves you can make to maximize your tax return. In 2022, that could mean buying an electric plug-in vehicle now or waiting until next year to maximize your return. As part of the Inflation Reduction Act of 2022, congress massively overhauled the Electric Vehicle Tax Credit. Changes included: Modified which vehicles qualify for the creditLimited credit claiming based on incomeExpanded the credit to qualifying used carsIf you’re in the market for an electric vehicle, here’s what you need to know about the tax credit amendments. Table of Contents Understanding the Electric Vehicle Tax CreditsPeople Who Qualify for the EV Tax CreditCars that Qualify for the New Vehicle EV Tax CreditCars that Qualify for the Used Vehicle EV Tax CreditVehicles That No Longer Qualify for the EV Tax CreditDon’t Let the Tax Credit Influence a Poor Vehicle Choice Understanding the Electric Vehicle Tax CreditsThe eclectic vehicle tax credit is a credit that you may qualify for if you purchased a plug-in electric car or truck. The credit exists to incentivize car owners to buy electric vehicles rather than gas powered vehicles. The credit ranges between $2,500 to $7,500 for new vehicles (depending on battery capacity) and $2,500-$4,000 for used vehicles starting in 2023. With gas prices increasing, going electric makes a lot of sense, and on Aug. 17, 2022, the Biden Administration signed the Inflation Reduction Act of 2022. Part of that legislation included an amendment to the Qualified Plug-in Electric Drive Motor Vehicle Credit. If you’re in the market for an electric vehicle, it's important to understand the new amendments. These are a few of the important components.Starting on Aug. 17, 2022, the EV Tax Credit only applies to vehicles assembled in North America. Imported vehicles are excluded from the new tax credit.The law is amended to exclude luxury vehicles. You can still claim the credit if you paid less than $80,000 for trucks, vans and SUVs. Sedans and other four-wheel vehicles must have a purchase price less than $55,000 to qualify.