What Does the New Inflation Reduction Act Mean for EV Drivers?

It's the talk of the town and with good reason. President Biden even interrupted his holiday to sign it right away: the Inflation Reduction Act. Dubbed "the most significant climate legislation in U.S. history" by the White House, this landmark bill is aimed at all low-emissions forms of energy to fight climate change. It's therefore no surprise that clean vehicles play a large part in the bill.

Tax Credits for New Cars

If you're in the market for a new clean car, you're in luck: stick to the rules and you're eligible for a tax credit of $7,500. There's one big caveat, though: your new EV has to be assembled in North America. The Department of Energy maintains a list of eligible vehicles to help you choose a make and model that qualifies.

No Tax Credits for Tesla, GM, and Toyota Cars Until 2023

Until the end of 2022, the tax credit excludes vehicles from Tesla, GM, and Toyota, as they've sold over 200,000 cars each — their cap for 2022. If you've got your heart set on one of these three brands, you'll have to hold out until January 1st, 2023 before buying your new EV.

High Earners Should Buy Now

If you earn over $150,000 (single filing taxpayer) and/or want to buy one of the fancier car models, you'd better move fast. From 2023, both high earners and pricy models won't be eligible for a tax credit any longer.

Used EVs Get a Tax Credit Too

The new addition to the tax credit landscape is the used EV — perfect timing, as more and more ex-lease EVs are starting to appear on the used car sales market. To get the $4,000 used EV tax credit, you must earn under $75,000 (for single filing taxpayers, or $150,000 for double filers). Furthermore, the car you buy should cost no more than $25,000 and be at least 2 years old. The used car tax credit is a welcome development that gives lower-income workers a real chance to switch to electric — whether they want to contribute to a greener world or simply want to lower their gasoline bills.

As Joe Britton, Executive Director of the Zero Emission Transportation Association (ZETA) said in response to the bill being signed: the Inflation Reduction Act will make the United States a clear leader in electric vehicle manufacturing and innovation.