American Buyers Can Now Get Up To $4,000 Used EV Credit, Here’s How
While buyers of new electric vehicles have been entitled to new tax credits under the Inflation Reduction Act for some time, customers on the used market will only now be able to claim a similar incentive.
The Environmental Protection Agency (EPA) recently announced that people who bought a pre-owned all-electric, plug-in hybrid, or hydrogen fuel cell electric vehicle on or after January 1, 2023, can now qualify for tax credits worth 30 percent of the value of the vehicle, or up to $4,000.
Eligibility and Limitations
The credit only applies to vehicles with a sale price of less than $25,000, and it can’t amount to more than you owe on your taxes. And don’t think you can get creative, because you can’t apply an excess credit to your future tax years.
A full list of vehicles that apply for the credit is on the EPA’s website, and all must be made by a qualified manufacturer (though all fuel cell vehicles get the credit). In addition, the EV you buy must come from a dealer, and its model year must be two years behind the current one in order to qualify for a credit.
You also can’t just trade EVs around to get tax credits. The IRS will not award you the incentive if the vehicle has already been transferred to a qualified buyer after August 16, 2022. Meanwhile, if you get a clean vehicle tax credit, you won’t be eligible for another for three years.
Income and Usage Requirements
And that hints at the next hoop that buyers have to jump through. In addition to the EVs, PHEVs, and fuel cell vehicles needing to qualify for the credit, the buyers must, too. That means that no one who is listed as a dependent on someone else’s taxes can qualify for the credit, nor can any single person who makes more than $75,000, nor any head of household who makes more than $112,500, nor any married couple who jointly make more than $150,000. The buyer must also intend to primarily use the vehicle in the U.S.
Calculating Your Tax Credit
If you and your new (to you) car satisfy all of these requirements, you can calculate how much of a tax credit you should expect with the handy tool on the EPA’s website.
Why This Matters
This new tax credit for used electric vehicles is a significant development in the push towards widespread adoption of electric vehicles. By providing an incentive for buyers on the used market, it encourages more people to consider purchasing an electric vehicle and helps to reduce the overall carbon footprint of the transportation sector.
The availability of tax credits for used electric vehicles also helps to address the issue of affordability. Electric vehicles are often more expensive than their gasoline-powered counterparts, and this has been a barrier for many potential buyers. By offering a tax credit, the cost of purchasing a used electric vehicle becomes more competitive with traditional vehicles, making them a more attractive option for budget-conscious consumers.
Additionally, this tax credit aligns with the government’s goal of reducing greenhouse gas emissions and transitioning to cleaner forms of transportation. Electric vehicles produce zero tailpipe emissions, which helps to improve air quality and combat climate change. By incentivizing the purchase of used electric vehicles, the government is supporting the transition to a more sustainable and environmentally friendly transportation system.
Conclusion
The introduction of tax credits for used electric vehicles is a positive step towards promoting the adoption of electric vehicles and reducing greenhouse gas emissions. By providing financial incentives for buyers on the used market, the government is making electric vehicles more accessible and affordable for a wider range of consumers. This will help accelerate the transition to a cleaner and more sustainable transportation system. If you’re in the market for a used electric vehicle, be sure to check the EPA’s website for the full list of eligible vehicles and calculate your potential tax credit.
