Will the New EV Tax Credit Actually Slow Down Electric Car Sales?
Updates to the federal EV tax credit have consumers confused. Could the long list of new rules put the brakes on EV adoption?
Written by Andrew Koole
Reviewed by Kathleen Flear
President Biden
wants to make electric vehicles
more affordable and EV adoption more widespread. But changes made in the new Inflation Reduction Act might cause enough confusion to slow things down instead.The
EV tax credit
is confusing enough as it is, with its reliance on tax bills, automakers, and battery power to determine each buyer’s eligibility. The new law clears up a few of those issues, but creates a few of its own in the process.Biden’s new EV tax credit fix
The old EV tax credit offered up to $7,500 of tax relief to Americans who buy new EVs, as long as those EVs were sold by manufacturers that hadn’t sold more than 200,000 eligible units.
Consumer Reports
(CR) says GM, Tesla, and Toyota had reached that cap.When President Biden signed the Inflation Reduction Act into law on August 16, that cap was lifted for a full year. It also made used EVs eligible for their own credit of up to $4,000.
But new stipulations limit access to the tax credit in different ways. New income limits exclude joint filers that make $300,000 or more and individuals who make $150,000 or more buying new EVs. For used EVs, the income cap is $150,000 for joint filers and $75,000 for individuals.
In order for a vehicle itself to qualify, its final assembly will have to take place in the U.S. On top of that, the new credit favors EV batteries that use components and minerals sourced from North America or countries with free trade agreements with the U.S.
From 2024 on, the law excludes batteries that rely on components sourced from “foreign entities of concern,” like China or Russia, from the tax credit altogether.
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Why would-be buyers are delaying electric car transactions
For people hoping to save money on an affordable EV, the changes to the tax credit seem like good news. But all the new rules around battery production and price leave many unsure which cars are actually eligible.
Take the Chevy Bolt, for example. While the electric car easily passes under the tax credit’s price bar, most consumers won’t know where all its battery components come from.
If it does qualify, CR warns that the credit could cause another problem—buyers wanting to save using the credit might hold off on ordering the car until the law comes into effect.
That delay will likely be short-term as the eligibility of vehicles becomes clearer, but any lag in sales could inflict unnecessary damage on the already troubled EV industry struggling to stay profitable.
MORE: There Are Some Unfortunate Exceptions to the Expanded EV Tax Credit
Other ways to save on EV ownership costs
Depending on the size of your annual tax bill, EV credits can be a strong incentive for choosing an electric vehicle for your next set of wheels. But tax credits aren’t the only way to save on car ownership.
The easiest way to make your car cheaper to own is to shop for car insurance with Jerry. A licensed broker that offers end-to-end support, the Jerry app gathers affordable quotes, helps you switch plans, and can even help you cancel your old policy.
And to ensure you always have the lowest rate, Jerry will send you new quotes every time your policy comes up for renewal, so you’re always getting the coverage you want at the best price. The average Jerry user saves over $800 a year on car insurance.
MORE: Biden Proposed 'Right to Repair' Initiative
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