Tax credit rules for next year not entirely clear
Image source: PC Mag
Tax credit: Several electric vehicle models from General Motors and Tesla could qualify for tax incentives in 2023, which is just a few days away.
Some EVs weren’t qualified for tax credits worth $7,500 this year.
Although the change is positive, the eligibility can only be valid for a limited time.
The August Inflation Reduction Act’s restrictions are to blame for the continued eligibility.
This Monday, the Treasury Department announced that the Act’s limitations on newly generated tax credits would not take effect right away.
As a result, during the first few months of 2023, the rules will be temporarily more lenient and permit higher tax credits on more EVs.
The restrictions on the new tax credits have been delayed until at least March 2023, according to the US Treasury Department.
The new restrictions apply to both the manufacturing location of the battery and the places where its minerals were obtained.
It also announced proposed regulations that would carry out the requirements.
The law specifies that the tax credit reductions will begin as soon as the “proposed guidance” is issued.
Vehicles can be eligible for larger tax credits after three months have passed.
For instance, General Motors said that its electric vehicles will only be eligible for a $3,750 tax incentive if the full restrictions are in place.
For two to three years, the company’s automobiles won’t be qualified for the $7,500 tax credit.
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Despite the buying possibilities they would present in early 2023, the restrictions have the drawback of making the regulations unclear.
Chris Harto, a senior policy analyst at Consumer Reports, stated that he prefers more transparency over less.
“It seems like things just seem to get more confusing each time they say something,” said Harto.
To encourage manufacturers to produce their electric vehicles (and their parts) in the US or other countries with which they have trade relations, tax laws have been implemented in place.
Additionally, they ensure that wealthy Americans who purchase luxury vehicles do not receive tax credits.
Customers will surely profit from the most recent announcement because it temporarily boosts the amount of accessible tax credit money.
One of the many ambiguous parts of the Act is the tilted tax credit for early 2023.
According to updated EV tax credit standards, the Chevrolet Bolt EV and EUV are now qualified for tax credits for the next year.
They were previously ineligible despite the fact that they were built in North America.
The 200,000 electric vehicle sales cap for any firm under the previous tax credit limitations was exceeded by General Motors and Tesla.
The cap will be raised under the new regulations, which are a part of the Inflation Reduction Act.
Despite the adjustment, not all customers (or electric vehicles) will be qualified for credits.
For instance, in addition to the demand for North American output, there will be pricing restrictions.
The maximum sticker price for a car is $55,000, while the maximum price for an SUV is $80,000.
As a result, a majority of Tesla cars (including the Model X SUV, Model S sedan, and Model 3) won’t qualify for tax credits at their present prices.
Since it is produced in the US, the Mercedes EQS SUV now eligible for tax benefits would stop by 2023.
“It shuffles the deck as to who’s eligible, and then the deck will get shuffled again when this guidance comes out [in March],” said Chris Harto.
“And it makes a giant mess for consumers, and automakers, and dealers.”
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Buyers cannot flip because of the restrictions on tax credits.
This implies that the final user must be the one who buys the vehicle.
Individuals are not qualified for the tax credit if they purchase a car with the purpose of reselling it later.
Additionally, the buyer’s income is subject to limitations.
The highest “modified adjusted gross income” for purchasers is $150,000 for individuals, $300,000 for married couples filing jointly, or $225,000 for the head of household.
High-end electric vehicle buyers won’t be able to get tax credits because of the restrictions.
The best thing buyers can do, in the opinion of Andrew Koblenz, vice president of the National Automobile Dealers Association, is find out if the vehicle they are considering purchasing is eligible for the tax credit.
Because some models are made in multiple factories, similar-looking SUVs purchased from the same dealer might not be eligible for the same level of credit.
“It’s a great time to be shopping,” said Koblenz.
“It’s great that there will be more vehicles eligible now, but you’ve still got to make sure the one you’re interested in is eligible.”
“You need to ask your dealer and your manufacturer that question, and you’ve got to make sure that you qualify too.”
Tax credit confusion could create a rush for electric vehicles in early 2023