The IRS has approved a new electric vehicle (EV) tax credit of up to $7,500 for owners of new qualified plug-in or fuel cell vehicles for 2023.
Requirements for qualifying vehicles have changed this year under guidelines imposed by the Inflation Reduction Act of 2022, according to the IRS.
To claim the credit, buyers must meet requirements including purchasing the car for personal use and not for resale. The car must be used primarily in the U.S.
There are also income limits. The maximum adjusted growth to qualify is $300,000 for married couples filing jointly, $225,000 for heads of households, and $150,000 for all other filers. The EV tax credit is also nonrefundable, so buyers cannot get back more on the credit than they owe in taxes.
Qualifying vehicles must have a battery capacity of a minimum of 7 kilowatt hours, have a gross vehicle weight rating of less than 14,000 pounds, and be made by a qualifying manufacturer with final assembly in North America.
Current qualifying manufacturers include Honda, Audi, BMW, Ford, General Motors, Hyundai, Jaguar, Kia, Mazda, Mercedes-Benz, Mitsubishi, Nissan, Polestar, Porsche, Rivian, Stellantis N.V. (including Chrysler and Jeep brands), Subaru, Tesla, and Toyota.
To meet the requirements, the vehicle also must be new, and the manufacturer suggested retail price (MSRP) cannot be more than $80,000 for SUVs and vans, and $55,000 for other vehicles, according to the IRS.
“This tax credit, among other incentives, will help make electric vehicles (EVs) more affordable for upper-income drivers in the U.S. But EVs are still more expensive than vehicles with internal combustion engines (ICE) and to reach desired adoption levels, more affordable models targeted to mid- and lower-market buyers will need to be developed. This tax credit tries to support mid-income buyers by limiting the benefit to buyers of vehicles costing less than $80,000/$55,000, but for the consumer who could not imagine ever owning a vehicle costing anywhere near these upper limits, the benefit will be all but meaningless,” Hemal Doshi, CEO of Dallas-based Universal EV Chargers told The Dallas Express.
Manufacturers must do more to bring lower-cost EVs to the market and EV battery technology will need to accelerate to bring competitive EVs to the lower end of the market to meet the objective of an electrified transportation economy. There are several obvious short- and long-term ways to do this: scaling EV manufacturing and adding sensible lithium capacity to bring production costs down and providing financing options that take into account the longer life of an EV compared to an ICE vehicle,” Doshi said.
The new rules for 2023 updated what qualifies as an SUV, making more EV tax credits available this year, according to Yahoo Finance. The IRS is now using the EPA’s guidelines for which vehicles qualify as SUVs or crossovers.
Under the new rules, all Tesla Model Y vehicles now qualify for the higher $80,000 limit for the EV tax credit. Previously, only the 7-passenger version of the Model Y was classified as an SUV by the IRS.
“To make it easier for consumers to know which vehicles qualify under the applicable MSRP cap, Treasury is updating the vehicle classification standard to use the consumer-facing EPA Fuel Economy Labeling standard, rather than the EPA CAFE standard. This change will allow crossover vehicles that share similar features to be treated consistently,” the Treasury said in a statement.
As previously reported by The Dallas Express, Tesla briefly brought down the price of its Model Y in January to ensure it qualified under the old rules but has since raised it after the tax credit expansion. Still, current Tesla prices remain lower than they were before the January price cuts.
