How the New EV Tax Credit Plan May Affect You

The new Clean Vehicle Credit plan is a small part of the massive Inflation Reduction Act of 2022 (IRA), but it is going to have a major impact on car buyers who look for price-reducing incentives to buy electrified vehicles.

The program dramatically changes the tax credit program that’s been in effect for years. And, for a few years, it’s going to substantially reduce the choices available to buyers looking for EV incentives.

The tax credit incentive is intended to make electrified vehicles more affordable and help the U.S. move toward a national goal of 50% electric vehicle sales by 2030.

It includes the same $7,500 maximum EV tax credit incentive as the present plan, which it replaces on Jan. 1, and it restores eligibility for the credits to three automakers that had lost it after selling 200,000 qualified vehicles, the limit in the previous program.

But — and it is a big but — it also adds new restrictions. The program restricts the country of origin for battery materials, requires North American assembly of qualified vehicles, and adds new price and buyer income restrictions. Together, these rules will effectively cut most new EVs and plug-in hybrid electric vehicles (PHEV) out of the picture for the next year or two.

To help move things along, though, the measure includes more than $15.5 billion in incentives and grants to promote development of a North American supply chain, including vehicle and battery manufacturing, and battery minerals sourcing.

The program includes a new tax credit of up to $4,000 for used “clean vehicles,” and they aren’t subject to the North American assembly or battery components restrictions.

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