The EV Tax Credit Changes Again New Year’s Day: What to Know Now
The federal tax credit of up to $7,500 for EVs came thanks to the Inflation Reduction Act (IRA). But ever since the electric vehicle tax credit was announced, there have been questions and confusion over everything from the EV tax credit income limit to which cars do or don’t qualify for the tax break.
And if you thought you finally understood how the EV tax credit works, look again. Some changes are coming on Jan. 1 for the 2024 electric vehicle tax credit you need to know now. If you want to buy an EV, these changes include both good and not-great news for some consumers.
2024 EV tax credit changes
As of New Year’s Day, the first change is that fewer vehicles will be eligible for the full $7,500 EV tax credit. That’s due to stricter rules for qualifying vehicles that kick in for 2024. Existing made-in-America requirements for battery and critical mineral components mean that vehicles eligible now (in 2023) for a partial or full credit may or may not qualify as of Jan. 1, 2024. Part of the reason is:
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- Critical mineral component percentages that need to be domestically produced or extracted will increase from 40% in 2023 to 50% in 2024.
- The qualifying percentage of North American battery components for a vehicle to receive a tax credit will increase from 50% in 2023 to 60% in 2024.
Another significant change for the new year is that vehicles with components made in China or by firms under Chinese government control won’t qualify for the tax credit.
Tesla Model Y tax credit after Dec. 31
The Tesla Model Y performance may still be eligible for a tax credit next year. Still, some popular versions of the Tesla Model 3 containing Chinese-made batteries will not be eligible for the tax credit in 2024.
On its website, Tesla acknowledged this with a post stating, the EV “tax credit will end for Model 3 Rear-Wheel Drive and Model 3 Long Range on Dec 31, 2023, based on current view of new IRA guidance.” (Currently, the Model 3 is eligible for the 2023 federal tax credit.)
Tesla, which has lowered prices on several of its models this year, also indicates that customers who take delivery of a qualified new Tesla by Dec. 31 and meet all federal requirements are eligible for a tax credit of up to $7,500. Additionally, Tesla Model X, Model 3, and Model Y Performance could remain eligible for a tax credit after Dec. 31.
Ford F150
The popular Ford Mustang Mach-E is eligible for a partial electric vehicle tax credit of $3,750 for 2023. However, Ford officials have indicated that this model may not qualify for the federal tax credit after Dec. 31. It is still unclear whether Ford’s F-150 Lightning electric pickup truck will qualify for a tax break in 2024. Currently, the Lightning is eligible for the full $7,500 2023 credit.
General Motor’s entire lineup of electric vehicles qualifies for the full $7,500 credit for 2023. Although the Chevy Bolt EV and EUV will be discontinued by the end of this year, GM has indicated that many of their EVs will remain eligible for tax credits in the new year. Cadillac’s LYRIQ and Chrysler’s Pacific PHEV are expected to qualify for a federal tax credit in 2024.
You can find more information about qualifying vehicles for the credit on the federal fueleconomy.gov website. Also, check out Kiplinger’s report for detailed information on how the EV tax credit works.
2024 EV tax credit point of sale
Despite uncertainty over which electric vehicles will qualify for the tax credit in the coming year, there’s a positive rule change to consider. Beginning January 1, eligible consumers can take the federal EV tax credit as a discount at the point of sale when they purchase a qualifying vehicle.
In essence, if you transfer the 2024 EV tax credit to the dealer, they can reduce the price of the vehicle by the credit amount. That means you can benefit from the tax break at the point of sale without waiting until it’s time to file your tax return.
To pass on electric vehicle tax credit savings to consumers at the point of sale, dealers must be registered with the federal government. However, it’s important to remember that MSRP price caps and income limits for EV tax credits still apply. Electric cars cannot have a price tag that exceeds $55,000, while electric SUVs cannot cost more than $80,000.
To claim a federal tax break on your favorite qualifying electric vehicle in 2023 or 2024, your modified adjusted gross income (AGI) must not exceed $150,000 (single), $225,000 (head of household), or $300,000 (married filing jointly).
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This article was originally published by a www.kiplinger.com . Read the Original article here. .