Everything You Need to Know About the IRA EV Tax Rebate
If you have been considering purchasing an electric vehicle, you might be excited to learn that the recently signed Inflation Reduction Act (IRA) provides an incredible incentive for EV purchases. Under the IRA, new electric vehicles can earn shoppers a $7,500 instant rebate, and used electric cars can earn up to $4,000. The best part is that this incentive takes place at the time of purchase, so you save immediately.
While it might sound like this new incentive is a game changer for those seeking to add an electric vehicle to their driveways, the EV tax rebate is not as easy to get as you might think. Read on to learn more about how the EV tax rebate works and how you can take advantage.
What Is the Inflation Reduction Act?
On Aug 16, 2022, President Biden signed the Inflation Reduction Act. This piece of legislation is meant to help deflate inflation while reducing the USA’s dependence on fossil fuels and increasing our use of renewable energy sources. The IRA also has sections meant to expand medicare access and lower prescription drug prices.
Homeowners are excited about the tax reductions involved with making electric upgrades to their properties. For example, you can earn a rebate of up to $840 for purchasing a new electric range, $2,500 for upgrading your home’s electrical wiring, and $4,000 to replace your electrical panel.
The plan goes even further with a tax rebate to help cover the cost of adding an EV charging station to your property. It covers 30% or up to $1,000 for residential installations. That means you can hire a local team of electricians to install your Level 2 charger to go along with your new electric car.
The IRA and the EV Tax Rebate
Tax credits for purchasing an electric vehicle are not necessarily new. Many states and local programs offer various incentives to help encourage people to make the switch to electric cars. Most federal programs have already dried up, which makes the new program under the IRA all the more enticing.
The IRA adjusts how previous tax rebate plans work. Unfortunately, the new project is also more complicated than previous programs, so getting an EV tax rebate is a little more challenging. There are strict guidelines regarding what kind of shopper and which EVs qualify for the EV tax rebate.
Who Qualified for the EV Tax Rebate?
The Inflation Reduction Act identifies who actually qualifies for this new tax incentive, which means it does not apply to everyone. Single tax filers cannot have an income over $150,000, and joint filers must have an income below $300,000.
The idea behind these restrictions is to help less affluent drivers afford an electric vehicle. It also aims to help automakers increase their customer bases until technology and manufacturing costs come down enough to make EVs an option for everyone.
Which Vehicles Qualify for the EV Tax Rebate?
The IRA not only limits which kinds of shoppers qualify for the EV tax rebate but also stipulates which vehicles qualify. The car must be assembled in North America to get the full tax credit, and a certain percentage of its electric battery elements must primarily come from North America.
These rules may seem fairly straightforward, but they severely limit which vehicles qualify. Some leading EV manufacturers do not assemble their EVs on this continent, which means options from Hyundai and Toyota would be off-limits. Luckily, brands like Ford, Chevrolet, Jeep, GMC, Tesla, and a few others potentially qualify.
The biggest challenge is that most of the main minerals used in EV batteries are unavailable in North America. Some loopholes exist for vehicles that get batteries with countries with a free-trade agreement with the US, so there are still quite a few available options.
The final limitation on which vehicles qualify for the EV tax rebate is the car’s price. Previous federal programs required that used EVs did not cost more than $25,000, but this cap no longer applies as of Jan 1, 2023. The new rules require that new sedans cost under $55,000 and new SUVs and pickup trucks cost less than $80,000. Since the average price of an EV is currently around $66,000, many options will not make the cut.
Seeing the Big Picture
While many people criticize the new law for being too strict, others believe it will eventually help shoppers. Since the tax incentive is challenging to obtain, automakers will be encouraged to bring their assembly plants back to North America. The IRA also aims to reduce the US’s dependency on China for EV materials.
The IRA also offers incentives for those who plan on buying an EV in the future but want to be prepared today. For example, most homes do not have the electrical foundation to support an EV home charger, and electric vehicles require a dedicated outlet or an at-home EV charger to keep their EVs moving. Many homes do not have an electrical panel that can handle the new electrical demands.
Many shoppers have taken advantage of the IRA’s tax rebates to upgrade their electrical services and writing before jumping into a new EV. The IRA sets this course of action perfectly, with rebates available for various electrical upgrades and enhancements. Even if your dream EV does not qualify for the rebate, the electrical work needed in your home to prepare for its arrival does.
There Has Never Been a Better Time to Call Watson’s
Whether you plan on purchasing a new EV or merely want to prepare your home for the eventual possibility, there has never been a better time to call Watson’s Charging Stations & Electric. We have helped countless homeowners and businesses go green and save money on utility bills by joining the electrification movement.
As the premier installer of EV home chargers, smart electrical panels, and more in the Gilroy, CA, and Santa Clara Valley area, we can help you get the most out of the IRA’s various tax programs. Even if you are unsure about your next move, call us to schedule a free consultation. No matter what kinds of electrical needs you have, we are on the job.