It’s income tax season…new EV rules

Some resources for INDIVIDUALS: (rules for businesses may be found here and here)

• IRS rules for vehicles purchased between 2010 and December 31, 2022
• IRS rules for vehicles purchased after December 31, 2022
• General IRS guidance and other “clean vehicle” incentives

There was big news yesterday, from the IRS, regarding the new rules for the income tax credit for purchasing new electric vehicles. There was a problem with the new MSRP cap, because the maximum MSRP depended on if the EV being is considered to be a truck/SUV versus a car. The problem is that the designation seemed arbitrary, with some crossovers being trucks and other, very similar vehicles, being designated as trucks.

Yesterday, this became much less confusing.

On top of the new rules that restrict the income tax credit, based on your income level (see IRS links above), there is a new that restricts the credit to vehicles built in North America. Actually, it requires the vehicle to be built in North America plus Puerto Rico, which is a U.S. commonwealth. Of course, no EVs are being built in Puerto Rico. No other U.S. commonwealth or territory seems to be allowed. I thought it odd that Puerto Rico is included, but the U.S. Virgin Islands is not. No EV is built there, either. All other U.S. territories and commonwealths are in the western Pacific, so I must assume they are excluded, due to the need to shorten our supply chains.

There is also confusion about the country-of-assembly requirement. As an example, Volkswagen builds the I.D. 4 both in Germany and the U.S.. We all think of Ford, a global manufacturer based in the U.S., to be an American company, but the Ford Mustang Mach-e is built in Mexico.

So how are buyers supposed to figure that out?

Well, there is a VIN lookup page, on the Alternative Fuels Data Center web page for the tax credit. You can jump straight to the decoder here.

For the first time, preowned vehicles are included…with limitations for a tax credit up to $4,000.

Rather than regurgitate the same information published on major EV websites, here are a couple that are easy to understand:

• Plug In America
  • Rules
  • Other incentives
• Electrek
• Green Car Reports
  • Lease loophole?
  • Material requirements delayed

As with all financial decisions, it is recommended that you contact an attorney or tax accountant to make sure you qualify.