Kelley Blue Book: New electric car buying incentives kick in Jan. 1, and a lot has changed. Here’s an explainer.

by | Dec 20, 2022 | Stock Market

Congress changed the rules governing electric car tax credits over the summer, but the changes didn’t immediately take effect. Some will kick in soon, while others will taper in over time. The evolving rules mean that the best time to buy an electric vehicle depends on everything from which car you want to your current income. We’ll break it down for you.

What has changed, what will change Before Congress passed the Inflation Reduction Act in August, federal EV tax credits were reasonably easy to understand. Buyers could claim a credit of up to $7,500 if they bought one of the first 200,000 EVs or plug-in hybrid vehicles (PHEVs) a manufacturer built. Once a manufacturer hit that cap, the credit phased out over the remaining year. Two manufacturers, General Motors
GM,
-2.02%
and Tesla
TSLA,
-0.24%,
had exceeded the cap. Buyers couldn’t qualify for a credit when buying one of their cars. Another — Toyota
TM,
-0.58%
— crossed it during 2022, meaning buyers could still be eligible for part of the credit. No other manufacturer had hit the cap, so all EVs and PHEVs from other manufacturers qualify today. Learn more: What is EV, BEV, HEV, PHEV? Here’s your guide to types of electric cars The act changes the rules radically. Broadly, it eliminates the manufacturer cap and introduces income and price limits instead. That means buyers can again qualify for the credit when buying a GM, Tesla, or Toyota product. But only if they fall under income limits and the car falls under price caps. Those rules take effect on Jan. 1, 2023. Some vehicles that don’t qualify for a credit on Dec. 31 will be eligible on Jan. 1 — chiefly those made by GM and Tesla.New income and price caps Only individuals reporting adjusted gross incomes of $150,000 or less qualify for the discounts. The limit moves to $225,000 for those filing as head of household and $300,000 for joint filers. The law also introduces price caps. The discount now applies only to cars priced under $55,000 and trucks and SUVs priced under $80,000. That rules out many Tesla products. Only the least-expensive version of its Model 3 sedan, the Model 3 Standard Range, sneaks in under the price cap. Every Tesla Model Y SUV qualifies. No Model S or Model X makes it in under the price cap.Factory location limits Congress aimed the new regulations at getting more Americans into electric cars to cut greenhouse gas emissions. But it has other aims, too. Lawmakers designed the act to boost North American manufacturing. Only EVs assembled in Nort …

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