Toyota joined Tesla and General Motors last month in losing its $7,500 federal tax credits for eligible electric cars and hybrids after selling over 200,000 of them. Now, after months of stalling in the Senate, a politik deal that Majority leader Schumer struck with Joe Manchin of West Virginia seems to have gotten things moving again. The tax credits for EVs are here to stay and won’t be manufacturer capped, but there’s some nuances now as well.
So What’s The New Incentive Look Like?
The news is that the tax credit is now uncapped, putting the aforementioned pioneering electrified brands in a good position. But this time around there are some qualifications. With the current tax credit battery size determines the exact tax rebate; this new part of the “Build Back Better” legislation actually says the credit applies at point of sale. If true, that’s a huge deal since the current (and frequently misunderstood) tax credit only benefits people with enough taxable income to realize it. The new credit goes into effect on January 1st, 2023.
However, there are some additional specs in the manufacturing and MSRP of vehicles now mandated.
- As initially proposed, a lot of focus is on American-manufacturing, for both the cars and the batteries running them. 50% of battery components must come from the US or one of our trade partners (like Canada and Mexico) for $3,750 of the credit. To get the full $7,500, at least 40% of battery-critical minerals need to be sourced from the US or aforementioned partners.
- The vehicle has to be assembled in North America for the credit to qualify.
- The minerals and component requirements are set to increase in stringency with time, giving domestic suppliers a chance to catch up.
- There’s an income limit of $150k for individuals, $225k if you’re the head of a household, and $300k for joint-filings.
- There’s an MSRP cap: big SUVs, vans, and trucks are capped at $80k, and everything else (read: normal cars) will be $55k. Sorry Model 3 Performance!
- The credit is set to end in 2032, giving manufacturers about another decade of fed-incentives.
Used Buyers Are Also In Luck
An exciting addition is an up to $4,000 incentive for used electric-vehicles, defaulting at 30% of the used value. There are some catches here too like a mandated dealer purchase of $25k or less (good luck with that in this market!) and a minimum two-year age requirement. There’s also some stricter income caps ($75k individuals, $112.5k head of household, and $150k on joint filers).
Nathan and I went into all of the new EVs you can still get with the current tax credit which applies until the end of this year. If you’re interested in buying a new EV now, check out that video below.