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Tax credit: Several electric vehicle models from General Motors and Tesla could qualify for tax incentives in 2023, which is only a few days away.
Some EVs weren’t qualified for tax credits worth $7,500 this year.
Although the change is positive, the eligibility might only be in effect for a short while.
The August Inflation Reduction Act’s limitations are to blame for the eligibility’s continuance.
The Treasury Department declared this week that the Act’s limitations on brand-new tax credits wouldn’t take effect right away.
As a result, for the first few months of 2023, the rules will be temporarily more lenient and permit bigger tax credits on more EVs.
The rules
The restrictions on the new tax credits were delayed, according to the US Treasury Department, until at least March 2023.
The location of the battery pack’s production and the sources of its minerals are covered by the new restriction.
It also disclosed draft regulations pertaining to the requirements.
The publication of the “proposed guidance” will initiate the reductions in tax credits, according to the language of the legislation.
Vehicles can later be qualified for higher tax credits over a three-month window.
For instance, General Motors stated that its electric vehicles will only be eligible for a $3,750 tax benefit once the full restrictions are in effect.
Two to three years will pass before the company’s automobiles are eligible for the $7,500 tax credit.
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Downside
Despite the buying opportunities it would bring in early 2023, the restrictions also have a drawback in that they will make the rules more ambiguous.
Chris Harto, a senior policy analyst for Consumer Reports, stated that he was hoping for more clarification rather than less.
“It seems like things just seem to get more confusing each time they say something,” said Harto.
The tax regulations are designed to encourage manufacturers to produce their electric vehicles (and their parts) in the US or other countries with which they have trade relations.
Additionally, they ensure that wealthy Americans who purchase luxury cars do not receive tax credits.
The most recent announcement certainly brings consumers good news because it temporarily makes more tax credit money available.
Qualifications
One of the Act’s many ambiguous elements is the skewed tax credit for early 2023.
The new EV tax credit regulations make the Chevrolet Bolt EV and EUV eligible for tax credits the next year.
They were built in North America, but they were previously ineligible.
The sales cap for any manufacturer under the previous tax credit rules was 200,000 electric vehicle, which was exceeded by General Motors and Tesla.
The limit will be lifted by the new regulations, which are a part of the Inflation Reduction Act.
Despite the change, not all buyers (or electric vehicles) will be qualified for credits.
For instance, in addition to the North American production requirement, there will be price limits.
The sticker price of an SUV cannot exceed $80,000, whereas the price of a vehicle cannot exceed $55,000.
Therefore, most Tesla models (such as the Model X SUV, Model S sedan, and Model 3) won’t qualify for tax credits at their current prices.
The US-built Mercedes EQS SUV, which is currently eligible for tax incentives, will no longer be qualified starting in 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
Purchasers are prohibited from flipping due to the restrictions on tax credits.
This implies that the end user must be the one who purchases the car.
The credit is not available to people who buy cars to resell them.
Additionally, the buyer’s income is subject to limitations.
Buyers aren’t allowed to have “modified adjusted gross income” of more than $225,000 for a head of household, $150,000 for an individual, or $300,000 for a couple filing jointly.
The limitations will prevent buyers of high-end electric vehicles from getting tax rebates.
The best thing buyers can do, according to Andrew Koblenz, vice president of the National Automobile Dealers Association, is inquire as to whether the car they are considering is eligible for the tax credit.
Due to the fact that some models are produced in many factories, identical-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.”
Reference:
Tax credit confusion could create a rush for electric vehicles in early 2023
