Tax credit for EVs in 2023 leads to confusion
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Tax credit: In 2023, which is just a few days away, several electric vehicle models from General Motors and Tesla may be eligible for tax credits.
This year, some EVs weren’t eligible for tax credits worth $7,500.
Despite the fact that the change is good, the eligibility might only last a short while.
Limitations imposed by the August Inflation Reduction Act are to blame for the ongoing eligibility.
The Treasury Department announced this week that the Act’s restrictions on newly created tax credits would not immediately go into effect.
As a result, the regulations will be temporarily more flexible in the first few months of 2023 and allow larger tax credits on more EVs.
The rules
According to the US Treasury Department, the limitations on the new tax credits have been postponed until at least March 2023.
The new restriction refers to both the location of the battery pack’s manufacturing and the sources of its minerals.
It also revealed proposed rules that would implement the demands.
According to the terms of the law, the reductions in tax credits will start as soon as the “proposed guidance” is published.
After a three-month period, vehicles may qualify for larger tax credits.
For instance, General Motors claimed that if the full restrictions are in place, their electric vehicles will only qualify for a $3,750 tax benefit.
The company’s vehicles won’t become eligible for the $7,500 tax credit for two to three years.
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Downside
The restrictions have a disadvantage in that they will make the regulations ambiguous despite the buying opportunities they would bring in early 2023.
Consumer Reports senior policy analyst Chris Harto expressed his desire for more clarity as opposed to more confusion.
“It seems like things just seem to get more confusing each time they say something,” said Harto.
The proposed tax laws are meant to incentivize automakers to produce their electric vehicles (and their parts) in the US or other countries with which they have trade agreements.
They also make sure that wealthy Americans who buy luxury cars don’t get tax credits.
The most recent announcement undoubtedly benefits customers because it temporarily increases the amount of tax credit money that is available.
Qualifications
The slanted tax credit for early 2023 is one of the Act’s numerous unclear components.
The Chevrolet cars Bolt EV and EUV are now eligible for tax credits for the next year according to revised EV tax credit standards.
Despite having been constructed in North America, they were previously ineligible.
General Motors and Tesla exceeded the 200,000 electric vehicle sales limit for any company under the prior tax credit regulations.
The new regulations, which are connected to the Inflation Reduction Act, will lift the cap.
However, not every customer or electric vehicle will be eligible for credits despite the change.
For instance, there will be pricing restrictions in addition to the requirement for North American production.
A vehicle’s pricing cannot be more than $55,000, while an SUV’s sticker price cannot be more than $80,000.
As a result, at their current prices, the majority of Tesla models (including the Model X SUV, Model S sedan, and Model 3) will not be eligible for tax credits.
Starting in 2023, the Mercedes EQS SUV, which is currently eligible for tax benefits since it is made in the US, would no longer qualify.
“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
Due to the limitations on tax credits, buyers are not allowed to flip.
This suggests that the car must be purchased by the end user.
People who buy cars with the intention of reselling them are not eligible for the credit.
Additionally, there are restrictions on the buyer’s income.
The maximum “modified adjusted gross income” for buyers is $300,000 for a couple filing jointly, $150,000 for an individual, or $225,000 for the head of household.
The restrictions will make it impossible for buyers of high-end electric vehicles to receive tax credits.
According to Andrew Koblenz of the National Automobile Dealers Association, the best thing purchasers can do is find out if the vehicle they are thinking of buying is qualified for the tax credit.
Similar-looking SUVs bought from the same dealer might not be qualified for the same level of credit due to the fact that some models are produced in numerous factories.
“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.”
Reference:
Tax credit confusion could create a rush for electric vehicles in early 2023
