CNN
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At the start of the new year, a number of popular electric vehicles, particularly certain Tesla and General Motors models, may be eligible for $7,500 in tax credits they weren’t eligible for in 2022. But that eligibility may only last a few months.
It’s because Limitations on new tax credits enacted in August as part of the Cut Inflation Act will not be implemented all at once, the Treasury Department announced this week. This means that the rules will, temporarily, be more generous, allowing higher tax credits on more electric vehicles, for the first few months of the new year.
The US Treasury Department, which enforces the rules, recently announced that the rules for some of the new restrictions on tax credits – including around where the vehicle’s battery is assembled and where it comes from minerals used – were postponed until at least March 2023, when he will announce the proposed rules regarding this part of the requirements. Under the wording of the legislation, however, the mere release of “proposed guidance” on these rules, which the Treasury says will happen in March, will immediately trigger the tax credit cuts. But some of the new rules come into effect as originally planned in January. This leaves a window of about three months in which some vehicles could qualify for much higher tax credits than they will later.
General Motors, for example, has already said that once all the restrictions go into effect — whenever that happens — its electric vehicles will only get a tax credit of $3,750. It is expected to be two to three years before GM vehicles can once again qualify for the full $7,500 tax credit, the company said. To qualify for the potentially higher pre-March tax credits, a vehicle must actually be delivered to the customer before that date, according to newly released Treasury Department guidelines. This could make the window of time even narrower, especially for popular models that customers already have to wait for.
While this may create a buying opportunity in the first few months of the year, the downside is that it only adds to the confusion around what is already a confusing set of rules, even by industry standards. tax regulations.
“I was kind of hoping for more clarity, not less,” said Chris Harto, a senior political analyst at Consumer Reports. “It seems like things seem to get more confusing every time they say something.”
Essentially, the tax rules are designed to incentivize automakers to manufacture their electric vehicles and all parts of those vehicles, as much as possible, in the United States or in countries with which the United States has trade agreements. They are also designed so that the tax credits do not benefit wealthy Americans who buy expensive luxury vehicles. The latest announcement, which will temporarily open up more tax credit money, is likely especially a good thing for consumers.
The imbalanced tax credit at the start of the year is just one of many potential sources of confusion.
Under new electric vehicle tax credit rules, the Chevrolet Bolt EV and EUV are eligible for tax credits in the new year. They were previously ineligible because, although built in North America – one of the requirements under the new rules – General Motors, Chevrolet’s parent company, and Tesla had long since sold more than 200,000 plug-in vehicles. This was the limit for a given manufacturer under the outgoing tax credit requirements. However, new rules, enacted as part of the Inflation Reduction Act, remove this limit.
Still, not all buyers and all electric vehicles will be eligible for credits. For example, in addition to the requirement that the vehicle must be built in North America, there will also be restrictions on its price. If it’s an SUV, pickup truck, or van, its listed price must not exceed $80,000, and if it’s a car, no more than $55,000 .
These price caps will be based on the vehicle’s full Manufacturer’s Suggested Retail Price (MSRP) or list price, including all factory-installed options. If the dealer charges more for the vehicle, or if there is a discount or rebate, it won’t matter. Rebate eligibility is based on actual MSRP only.
As a result, most Tesla models, including the Model X SUV and Model S sedan and even the Model 3, as currently priced on Tesla’s website, will still not be eligible for tax credits. And the Mercedes EQS SUV, which is assembled in the United States and is currently eligible for tax credits, according to an IRS website, will become ineligible in the new year.
“He’s shuffling the game to see who’s eligible, then the game will be shuffled again when these tips come out. [in March]”, Harto said. “And that creates a giant mess for consumers, automakers and dealers.”
Also, no flips are allowed. The person purchasing the vehicle must be the end user. If you buy the vehicle just to resell it immediately to someone else, you cannot claim the credit.
There are also limits on the buyer’s income. The buyer cannot have a “modified adjusted gross income” greater than $150,000 for an individual, $300,000 for a couple filing jointly, or $225,000 for a single householder. These restrictions will prevent many buyers of luxury electric vehicles from obtaining tax credits.
The best thing vehicle buyers can do is ask if the specific vehicle they’re buying is eligible for a tax credit, said Andrew Koblenz, vice president of legal and regulatory affairs at the National Automobile Dealers Association. Some vehicle models are manufactured at more than one plant, so two identical-looking electric SUVs on the same dealer lot may not qualify or qualify for the same amount of credit.
“It’s a good time to go shopping. It’s great that there are more eligible vehicles now, but you still need to make sure the one you’re interested in is eligible,” Koblenz said. “You should ask your dealer and your manufacturer this question and also make sure you are eligible.”
