The Polestar 2 electric vehicle (EV) does not qualify for federal EV tax credits anymore, following the passing of 2022’s
Inflation Reduction Act, which requires that eligible vehicles be assembled in North America.
Starting in 2010, the federal government has, up until this year, offered between $2,500 and $7,500 in tax incentives for purchasers of new electric vehicles. However, now that the revised rules on federal EV tax credits have gone into effect, certain vehicle models—including the Polestar 2—no longer qualify. Let’s discuss some of the details.
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Is the Polestar 2 EV still eligible for a federal tax credit?
No, the Polestar 2 EV is not eligible for any federal
hybrid or electric car tax credits from the IRS as of August 16, 2022. Further laws surrounding these federal tax credits will be put into effect in March 2023.
Allow us to provide some further explanation. In 2005, the federal government started offering tax credits of up to $3,400 for individuals who purchased new hybrid vehicles. This was limited to a cap of 60,000 vehicles per auto manufacturer, meaning that any manufacturer who sold more than that number would no longer be able to sell tax-incentive-eligible vehicles.
By 2010, when the
Nissan Leaf EV and
Chevrolet Volt PHEV became available to the public, the 2009 American Recovery and Reinvestment Act allowed them to be eligible for a maximum of $7,500 in federal tax credits, with a 200,000-vehicle limit per manufacturer, which
Tesla and GM surpassed in 2018.
While the vehicle limits have now been removed, other limitations to eligibility have been added, particularly for EV manufacturers whose products do not have their final assembly in North America. As such, the Polestar 2 will lose its eligibility for federal tax credits because every Polestar 2 currently has its final assembly at the Luqiao CMA Super Factory in Zhejiang, China.
What you should know about the new federal EV tax credit requirements
Let’s talk more about these new EV tax credit regulations, and how they’ll impact new electric vehicle owners in 2023.
First off, the tax credit of up to $7,500 will not be based on the size of the battery. Starting in March 2023, qualification for these credits will depend on where minerals and components contained in the battery were sourced from.
Until then, any new electric vehicle with final assembly in North America will be eligible for a maximum of $7,500 in tax credits, based primarily on the price of the vehicle and the income of the buyer.
SUVs, vans, and pickup trucks that cost more than $80,000 are no longer eligible for tax credits, and all other types of vehicles are limited to a maximum price of $55,000 to be eligible.
There are also eligibility limits for the total income of the buyer. Single car buyers will only qualify if they make $150,000 or less per year. Joint income between spouses is capped at $300,000.
As of January 1, 2023,
used cars can also qualify for tax credits. To be eligible, used vehicles must be at least two years old when purchased, and fall under a sale price limit of $25,000. Eligible vehicles must also be purchased from a dealer. Used EVs put into service after December 31, 2023, will be offered a credit of up to $4,000.
While the new rules seem fairly restrictive, it’s important to understand the role they’ll be playing in terms of reducing inflation. The main goal here is to ensure that more locally manufactured EVs are purchased and to ensure that EV producers are selling vehicles that the average person can afford. Tesla has already reduced the price of certain models to make them eligible for federal tax credits.
Other electric vehicle incentives
The new rules might mean you can’t get a federal tax credit for your Polestar 2, but it might still qualify for other available incentives. For example, certain states and municipalities offer rebates and tax credits for drivers who elect to purchase an EV, such as reimbursement for home charging system installation.
One example is
California’s electric vehicle incentive, which provides up to $7,000 in rebates. In
Florida, electric vehicle incentives are varied among its counties and municipalities and aren’t the same statewide. For example, Jacksonville residents can qualify for up to $7,500 in regional EV tax rebates, on top of any federal tax credits that they and their vehicle may be eligible for.
Is the Polestar 2 still worth buying?
If the $49,800 to $76,900 starting price isn’t a deterrent for you, then the Polestar 2 could still be worth buying, but don’t kid yourself—you don’t need to spend $50,000+ on a new EV.
The Polestar 2 has a maximum range of 270 miles with a single motor, not much more than some similar EVs that are nearly half the price. What sets the Polestar 2 apart from these more affordable models is primarily performance. You’ll be achieving Tesla-comparable performance, at prices slightly higher than the Model 3’s.
What to buy instead of a Polestar 2
With the Polestar 2, you are paying a premium for a step in luxury rather than convenience. If you’re looking for a more affordable EV that supplies a comparable range, the
Chevrolet Bolt is a great choice.
However, if you want to make more of a flashy statement with the car you drive, you might consider something like a
BMW 330e, which is around the same price point as an entry-level Polestar 2 but is still eligible for federal tax incentives.
Unfortunately, it’s going to be tough to find a model that qualifies for federal tax credits, especially if you’re looking for an EV in the same price range as the Polestar 2. There are some fair alternatives in the PHEV space if that’s more your tune, but even with their tax credits, they’ll still cost more than a 2 EV.
So, what should you buy instead of a Polestar 2 EV or PHEV? Here are some suggestions.
If you really want the federal tax credit: Tesla Model 3
Possible tax credit: $7,500
Any Tesla Model 3 that costs less than $55,000 is now eligible for federal tax credits since the 200,000-vehicle manufacturer limit no longer applies. Plus, each Tesla Model 3 has been reduced in price by $3,000 as of January 2023.
Is the Tesla Model 3 better than a Polestar 2? Not really. But it will be cheaper and provide a better range than any Polestar 2. The Tesla Model 3 also gets better fuel economy, rated for 132/138/126 MPGe combined/city/highway compared to the Polestar 2’s 107/113/100 MPGe
If you just want a great EV: BMW i4
You won’t get a tax incentive for a new BMW i4, but if you’re looking to buy a stylish, performance-oriented electric vehicle, the i4 will impress far more than a Polestar 2. An extra range of up to 300 miles is available with the i4 eDrive 40.
In terms of fuel economy, the BMW i4 doesn’t measure up to the Polestar 2. The eDrive 40 model gets 99 MPGe combined, while the performance-oriented M50 trim gets only 80 MPGe combined.
Best affordable Polestar 2 EV alternative: 2023 Chevrolet Bolt EV
Possible tax credit: $7,500
The Chevrolet Bolt EV is a fantastic option if you’re not looking for anything particularly fancy. It has an estimated 259-mile range, quite close to the Polestar 2’s figures.
The downside? The Bolt simply isn’t a performance-oriented car—it’s striving to be affordable, competitive, and efficient, and that’s what it is. Ignore the 6.7-second 0-60 mph time, and you can happily enjoy an EPA fuel economy rating of 118/127/108 MPGe (comb/city/hwy).
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