The Treasury Department and the IRS have published initial information on changes to the tax credit for electric vehicles strengthened by the Inflation Reduction Act (the Act). The Act includes tax incentives designed to lower costs for working families, grow the clean energy economy and strengthen the country’s supply chains. Starting August 17, 2022, the Act’s new requirement for qualifying electric vehicles that were assembled in North America goes into effect.
Additionally, the IRS and Treasury Department has released guidance and frequently asked questions (FAQs) information on how the North America final assembly requirement will work. Consumers can determine what vehicles are eligible and claim a credit of up to $7,500 after their purchase. Starting January 1, consumers may be eligible for a tax credit for used or previously owned cars and businesses may be eligible for a new commercial clean vehicle credit. Further, the Department of Transportation and Department of Energy published new resources to assist consumers identifying eligible vehicles. Consumers and auto dealers can enter the Vehicle Identification Number (VIN) of a specific vehicle into a website to determine its eligibility for the tax credit. The Department of Energy published a list of Model Year 2022 and early Model Year 2023 electric vehicles that likely meet the final assembly requirement.
Further, the final assembly requirement will not apply until after the Inflation Reduction Act’s enactment on August 16, 2022. Individuals who entered into a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022, but do not take possession of the vehicle until on or after that date can claim the credit based on the rules that were in effect before the Act’s enactment. Finally, the Inflation Reduction Act made several additional changes to the electric vehicle tax credit that will take effect starting in 2023.