The EV Tax Credit: How to Make the Most of It
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Here's your money briefing for Tuesday, August 23rd. I'm J.R. Whalen for The Wall Street Journal. The Inflation Reduction Act signed into law last week features tax credits for people who purchase electric vehicles. But the devil's in the details. And if you want to get an EV off the lot, there are ways to do it that'll put more money in your pocket.
The maximum tax credit is still $7,500 for new electric vehicles. So fast-tracking your purchase can help you score these savings because the law also puts in new restrictions as of January 1st.
Coming up, we'll talk with our personal finance reporter, Ashley Ebling, about those restrictions and how you can get around them. That's after the break.
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What new EV tax credits did the Inflation Reduction Act introduce and when did they take effect?
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One way the new Federal Inflation Reduction Act focuses on climate is incentives in the form of tax credits for people who buy electric vehicles. But with those new potential dollars in your pocket come a new slate of rules governing who's eligible. So where does the government draw the line? WSJ personal finance reporter Ashleya Ebling has been going through the maze of numbers and stipulations, and she's here to clear things up. Hey, Ashleya, thanks for being with us.
Hi, JR. Thanks for having me.
So, Ashleya, there are a lot of moving parts here. So let's take this one step at a time. First of all, what's not changing under the new rules?
Well, what's huge is the maximum tax credit is still $7,500 for new electric vehicles. That applies to purchases made between August 16th, the day the bill was signed into law, going forward for 10 years. So fast-tracking your purchase can help you score these savings because the law also puts in new restrictions as of January 1st.
Yeah, I want to get to some of those changes in a moment. But does this mean that any EV purchased in that period qualifies for the tax credits?
There's one restriction that kicks in right on August 16th, and that limits the credits to vehicles with final assembly in North America. How do you know that? How do you know where your car was assembled? It's not always easy. The National Highway Traffic Safety Administration has put up on their website something called a VIN decoder, and you can type in your vehicle ID number of a car you bought or plan to buy. But there's something tricky when it comes to Tesla vehicles, for example, because manufacturing caps still apply. So that's an old rule that still applies. No credits are available for manufacturers such as Tesla that have already reached 200,000 EV sales.
Now, earlier you mentioned that under the new law, these credits went into effect on the 16th. What if somebody purchased their EV before August 16th?
So the new law does have good news for those people. They're called transition or grandfathering rules. EV buyers who entered into a binding contract to buy a new EV before August 16th can still claim the credit based on the old rules, even if they take the possession of the vehicle later after August 16th.
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