July 15, 2024

How the Inflation Reduction Act affects EV tax credits

3 min read
How the Inflation Reduction Act affects EV tax credits

The IRS issued guidance clarifying the electric vehicle tax credit rules outlined by the Inflation Reduction Act, which was signed into law on Tuesday.

Here are edited excerpts.

EVs purchased before Aug. 16

» If you entered into a written binding contract to purchase a new qualifying electric vehicle before Aug. 16, but do not take possession of the vehicle until on or after Aug. 16 (for example, because the vehicle has not been delivered), you may claim the EV credit based on the rules that were in effect before August 16. The final assembly requirement does not apply before August 16.

EVs purchased and delivered Aug. 16-Dec. 31

» If you purchase and take possession of a qualifying EV after Aug. 16 and before Jan. 1, aside from the final assembly requirement, the rules in effect before the enactment of the Inflation Reduction Act for the EV credit apply (including those involving the manufacturing caps on vehicles sold). If you entered into a written binding contract to purchase a new qualifying vehicle before Aug. 16, 2022, see the rule above.

What is a written binding contract?

» In general, a written contract is binding if it is enforceable under state law and does not limit damages to a specified amount. While the enforceability of a contract under state law is a facts-and-circumstances determination to be made under relevant state law, if a customer has made a significant nonrefundable deposit or down payment, it is an indication of a binding contract. For tax purposes in general, a contract provision that limits damages to an amount equal to at least 5 percent of the total contract price is not treated as limiting damages to a specified amount. For example, if a customer has made a nonrefundable deposit or down payment of 5 percent of the total contract price, it is an indication of a binding contract. A contract is binding even if subject to a condition, as long as the condition is not within the control of either party. A contract will continue to be binding if the parties make insubstantial changes in its terms and conditions.

Potentially eligible and ineligible models

» Below is a list of 2022 and 2023 EVs that may meet the North American final assembly requirement. According to the IRS, because some models are built in multiple locations, there may be vehicles on the Department of Energy list that do not meet the final assembly requirement in all circumstances.

» GM and Tesla have reached a cap of 200,000 EV credits used and are therefore not currently eligible for the credit.

» Manufacturer sales cap met in bold.

2022 2023
Audi Q5 BMW 3-series Plug-In
BMW 3-series Plug-In Bolt EV
BMW X5 Cadillac Lyriq
Chevrolet Bolt EUV Mercedes EQS
Chevrolet Bolt EV Nissan Leaf
Chrysler Pacifica PHEV  
Ford Escape PHEV  
Ford F Series  
Ford Mustang MACH E  
Ford Transit Van  
GMC Hummer Pickup  
GMC Hummer SUV  
Jeep Grand Cherokee PHEV  
Jeep Wrangler PHEV  
Lincoln Aviator PHEV  
Lincoln Corsair Plug-in  
Lucid Air  
Nissan Leaf  
Rivian EDV  
Rivian R1S  
Rivian R1T  
Tesla Model 3  
Tesla Model S  
Tesla Model X  
Tesla Model Y  
Volvo S60  

How to identify where a vehicle is assembled

» To identify the manufacturing location for a specific vehicle, search the vehicle identification number of the vehicle on the VIN Decoder website for NHTSA. The website, including instructions, can be found at VIN Decoder.

https://www.autonews.com/regulation-safety/how-inflation-reduction-act-affects-ev-tax-credits

Copyright © All rights reserved. | Newsphere by AF themes.