I was asked today if the USA’s new EV tax subsidies under the Inflation Reduction Act take effect on 1 March.
The short answer is no, the subsidies went into effect 1 January 2023.
However, it’s a lot more complicated than that.
The IRS has deferred implementing the whole program until they can issue rules sometime in March. In the meantime, the full $7,500 tax credit is available to qualifying EVs by buyers who meet the eligibility requirements.
A qualifying EV must have a traction battery greater than 7 kWh. (All BEV meet this requirement. The low capacity limit is for plug-in hybrid vehicles.) It must be assembled in North America, weigh less than 14,000 pounds, and the MSRP fall below $55,000 for sedans and below $80,000 for SUVs.
The IRS has posted a list of qualifying manufacturers and the vehicles that meet these requirements. For example, GM’s Chevy Bolt qualifies (it’s assembled by the UAW in Michigan), as do Volkswagen’s ID.4, which is assembled in Tennessee. Nissan’s Leaf also qualifies as does Ford’s lineup.
The buyer must have an adjusted gross income of less than $300,000 for couples filing jointly to qualify.
The key is that the buyer must take delivery of the EV (put it into service in IRS lingo) before the IRS issues its rules sometime in March.
Let’s take the example of a reasonably outfitted Chevy Bolt EV (heated seats and steering wheel, collision warning system, and 240-V charge cable) in California’s Central Valley. And let’s assume the buyer can take full advantage of the tax credits.
The net cost, barring any dealer markup, would be $17,000.
The “out-the-door” price would include 10% in taxes and fees, bringing the total cost to $18,700 or about $19,000 for a fully capable 250-mile range EV.
Low-income buyers in California would qualify for an additional $2,500 in clean vehicle rebates.
What EVs will and will not qualify for the post-March federal subsidy program won’t be known until the IRS issues its final regulations.
One of the most reliable sources for information on the evolving program is Plug In America. Their presentation from September 2022 is available to download here. Their 12 January presentation can be downloaded here. Plug in America’s video of their presentation includes answers to some very specific questions so it’s worth a listen as well. For example, they answer the question of what does the IRS mean when it says “put into service.”
Plug In America has also summarized the complex eligibility requirements, how manufacturers and their vehicles qualify, and how the new program affects commercial and leased vehicles.
