Learn More About The Inflation Reduction Act EV Tax Credit That Can Save You Up to $7500

As of August 16, 2022, the United States signed the Inflation Reduction Act into law, which expanded the tax credit benefits for new electric vehicle owners in the US. Currently, you could save up to $7500 on a new and eligible EV, like the Nissan Leaf. What could this mean for you? How do you ensure the entire $7500? Read on to learn the essential benefits of the Inflation Reduction Act and how it could affect your future car-buying decisions.

What Is The Inflation Reduction Act of 2022?

The senate summary on the Inflation Reduction Act state that it is intended to "fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40 percent by 2030." The act does this by investing $300 billion in Deficit Reduction and $369 billion in Energy Security and Climate Change programs over the next ten years.

How Do You Get The Electric Vehicle Credit, And Is It Available For Preowned Vehicles?

The IRS has broken the $7500 tax credit into two equal $3750 chunks, which you can receive one or both when purchasing a new vehicle. For new vehicles to receive even one of the credits, they must meet the following criteria in addition to manufacturing requirements for each half:

  • Maximum MSRP of $80,000 for SUVs and pickup trucks
  • Maximum MSRP of $55,000 for all non-SUVs and pickup trucks
  • Income Cap (Maximum taxable income of purchasers)
    • $150,000 for single filers
    • $225,000 for the head of household filers
    • $300,000 for joint filers
  • Purchased after January 1, 2023.

Additionally, new electric vehicles must have at least 40% of battery components made within the US, or free trade nations, to meet the minimum for the first $3750. For the second half, another majority of materials must come from the US and be used in the final construction of the vehicle to be eligible for the $3750 credit. What About Preowned Vehicles? Used electric vehicles are subject to the Inflation Reduction act as well. While pre-owned vehicles do not have special component restrictions, used sales are also subject to different strict requirements. To receive 30% of the sale value, up to $4000, purchasers must meet the following:

  • Vehicle must be at least two years old as of the time of purchase
  • Sold by a licensed dealer (No private vehicle sales)
  • Under $25000 purchase price
  • Income Cap (Maximum taxable income of purchasers)
    • $75,000 for single filers
    • $112,000 for the head of household filers
    • $150,000 for joint filers

When Does This Credit Take Effect?

All qualifying vehicles purchased after January 1, 2023, will be available for the tax credit for the year, with provisions allowed for the next ten years. If you bought a vehicle before January 1, 2023, it is held under the previous tax credit rules and thus are subject to purchasing caps of 200,000 vehicles per manufacturer. You can check Qualifying Vehicles on the department of energy website or by checking manufacturing specifications on new cars.  

NOTED: The IRA EV Credit is continually adjusting. Please check with our team for the latest.



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