EV Tax Break Will Be Harder To Come By

By: James Flippin · April 05, 2023 · Reading Time: 3 minutes

Bad Break

Last year, the Inflation Reduction Act, or IRA, was signed into law. The legislation offered clean energy incentives, including tax credits for the purchase of electric vehicles. Initially, the rules set limits on manufacturers’ retail sales price and buyer’s income, restricting who can benefit from the maximum $7,500 credit.

Now, revisions to those guidelines will likely result in a shorter list of qualifying vehicles. The new guidance requires certain minerals and battery components to be used in manufacturing EVs, which could leave some vehicles eligible for only half the available tax credit, or none at all.

These revisions are set to take effect on Tax Day, April 18.

Diluted Tax Benefit

The EV tax incentives provided in the IRA are designed to support US manufacturers and workers. The same is true of these revisions.

Both the critical minerals and the battery component requirements are tied to North American sourcing and processing. Meeting the prescribed standards for either one but not the other provides for a $3,750 credit. Vehicles must pass both tests to qualify for the full $7,500 credit.

Additionally, the legislation proposes that the required percentage of minerals and battery components sourced in North America increase over time.

Copper Lining

As the rules evolve, consumer confusion over which vehicles are eligible may increase as well. Although the current list of qualified vehicles provided by the IRS will update on Tax Day, given planned changes to eligibility criteria, this latest draft will likely be written in pencil.

If you’ve been planning to purchase an EV, it may sound like you need to pull the trigger sooner rather than later to take advantage of the best tax advantages. But there’s one update coming that will make getting the tax credit simpler.

In 2024, consumers will be able to have the discount applied directly to the purchase price at the point of sale. The tax credit will instead transfer to the car dealer. So, for those looking to go electric, you’ll soon be able to get select EVs with both a reduced price and a reduced headache come tax time.

Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!

Check it out

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.
The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.
Communication of SoFi Wealth LLC an SEC Registered Investment Advisor
SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.

TLS 1.2 Encrypted
Equal Housing Lender