Does Hyundai Ioniq 5 Qualify For Federal Tax Credit?

Since several of the more well-liked models have passed the important 200,000 units sold threshold, fewer vehicles are now eligible for the federal EV tax credit. The Hyundai Ioniq 5 is still considered a vehicle that qualifies for the credit even though it hasn’t reached that mark.

The Ioniq 5 achieves a combined 110 MPGe, according to the US Department of Energy. With a 77.4 kWh battery, a 300-mile range, and a platform with rear-wheel drive, this reasonably priced electric SUV is also available with a dual-motor all-wheel drive system that has a 244-mile range.

All of this indicates that the Ioniq 5 satisfies the standards of the Clean Air Act and other laws so that you may be eligible for an EV tax credit.

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Important Clauses of the Inflation Reduction Act

The following laws:

removes the 200,000 vehicle tax credit cap that barred the use of tax credits for EVs and plug-in hybrids made by Tesla, GM, and Toyota.
does away with current tax subsidies for expensive EVs, including the Tesla Model S and Model X, Lucid Air, and the GMC Hummer EV.
eliminates tax credits for cars such the Toyota bZ4X, Subaru Solterra, Hyundai Ioniq 5, Kia EV6, and BMW i4 that aren’t made in North America.
imposes a cap on the annual adjusted gross income that can be earned by buyers of $150k for individuals filing their taxes alone, $225k for those filing as the head of household, and $300k for married couples filing jointly.

Additionally, the plan will limit the use of the entire tax credit for new electric vehicles to those made with North American-made battery components and minerals recycled in those nations with which the United States has free trade agreements. Beginning in 2024, the vehicle will not be eligible for any tax credits if any minerals or components are obtained from “foreign entities of concern,” such as China or Russia. The International Energy Agency’s examination of the EV supply chain through 2022 reveals that China now supplies a disproportionate amount of materials, parts, and battery cells. Used automobiles are not subject to this restriction.

Which electric vehicles are still eligible for the federal EV tax credit under the Inflation Reduction Act?

Any fully electric or plug-in hybrid car constructed outside of North America is automatically disqualified from eligibility under the new regulations included in the Inflation Reduction Act.

Based on where they were made, certain vehicles from mass-market manufacturers are no longer qualified for the tax credit, including the Hyundai Ioniq 5, Kia EV6, and Toyota Rav4 Prime.

On January 1, 2023, additional price and income ceilings as well as restrictions on the sources of the batteries’ raw materials take effect.

Do hybrid cars qualify for a tax credit?

A tax credit of up to $7,500 will be given to new electric and fuel-cell automobiles. Some plug-in hybrid cars will still be eligible.
Only automobiles with a price below a particular threshold will be accepted. The ceiling for SUVs, pickup trucks, and vans is $80,000 per vehicle. The credit cap for sedans, hatchbacks, wagons, and other cars is $55,000. (Learn more about reasonably priced EVs.)
There won’t be a cap on the volume of credit-eligible automobiles that an automaker can sell.
Unlike in previous years, a complex set of computations based on where the vehicles are produced and where the components that make up their batteries are purchased will determine the precise amount of the new tax credit. Through 2026, these criteria will be tightened yearly. By the end of December, the measure requires proposed regulations outlining these criteria, which will likely be adopted sometime in 2023.
The only automobiles that qualify for a tax credit are those built in North America.
Vehicles having parts from “foreign entities of concern,” such as China and Russia, will be excluded as of December 31, 2023.
Dealerships will be permitted to provide customers with the value of a tax credit up front beginning in 2024. For car buyers, this might make the process easier.
Buyers of cars must fit specific financial requirements. Although heads of household must earn less than $225,000 and individual filers can only qualify with income under $150,000, households with an adjusted gross income up to $300,000 will still be eligible for the benefit.
For the first time, purchasers of used EVs will be eligible for a tax credit of $4,000 or 30% of the vehicle’s sale price, whichever is lower, but only if they purchase the vehicle from a dealership.
For buyers of used EVs, the income requirement is lower: $150,000 for joint filers, $112,500 for the head of family, or $75,000 for an individual.
Bidirectional EV chargers, or those that can charge your car and power your home simultaneously, are now qualified for tax breaks.

Although I adore quirky, vintage European sedans like the Renault Medallion, it is my passion to assist people in finding a car that is safe, dependable, and still makes them smile—even when they’re caught in traffic. You can usually find me planning my next vacation or exploring a new city on foot when I’m not behind the vehicle or at the computer.

Teslas are they eligible for tax credits?

Only Tesla, General Motors, and most recently Toyota have used all 200,000 EV credits available under the incentive program that was in place a decade ago. Starting in the following year, they will be eligible for new $7,500 credits for their clients.

The operation of a federal tax credit

A tax credit is a reduction in your tax liability on an exact dollar for dollar basis. Your net liability is zero, for instance, if you owe $1,000 in federal taxes but are entitled to a $1,000 tax credit. Some credits, like the earned income credit, are refundable, so even if the credit exceeds your entire tax bill, you will still receive the full amount of the credit. You will therefore get a $600 refund if your total tax is $400 and you claim a $1,000 earned income credit.

Refundability of the federal EV tax credit

The only incentive to buy right away is if you’re ready to buy and the car you want won’t be available and within the price limits next year. Just keep in mind that the tax credit is not “refundable,” so utilize it or lose it even if you only owe the government $5,500 when you submit your 2022 taxes. Also remember that you received nothing if you paid a “market adjustment” over the sticker price.

There are several good reasons to wait if you don’t need a car right away. First off, if you desire a used electric vehicle (EV), there won’t be a credit available until the next year.

Also as mentioned, the new law’s specifics are still being worked out. In the upcoming weeks and months, the IRS and Department of Treasury “will post information and invite opinions from the public on numerous existing and proposed tax credits, including on further adjustments to eligibility standards for clean car tax credits,” according to their statement.

Automakers will be putting a lot of effort into strengthening their assembly and supply plans in the meantime to maximize the number of tax credits that can be applied to their vehicles and to be eligible for some of the newly available industry subsidies. They will also be working to provide vehicle variants that are within the price limits. Finally, a slew of brand-new EVs and PHEVs are in the works for the upcoming few years that may succeed whether or not you qualify for a tax credit.

For 2021, are there any new tax credits?

For 2021, the child and dependent care credit has increased. The maximum credit percentage for qualified costs rose from 35% to 50% for 2021. Additionally, eligible taxpayers may deduct up to the following amounts for qualified child and dependent care costs: $8,000 for each qualified child or dependent (increased from $3,000 in past years);

How do I apply for an EV tax credit?

As previously indicated, nearly every significant automaker now offers electric vehicles for sale. Many people think that all-electric fleets may not be that far off in the future. To find out which models are electric, visit a dealership that is associated with any of the aforementioned companies as well as others like Chrysler or Honda. Which models are eligible for the tax credit will be known by the dealer. They will also be aware of those who are eligible for the full credit. You can also conduct your own web study.

You should be aware that you cannot claim the tax credit if you plan to purchase a Tesla. Since it has long since surpassed the 200,000 models sold threshold, Tesla is no longer an eligible vehicle.

There are a few additional requirements that should be specified. The vehicle must have four wheels, be under 14,000 pounds in weight, and be charged by plugging into an outside power source. Its battery must also have a four kilowatt-hour capacity. The vehicle must have been produced after 2010, and used cars are not eligible for the credit. The majority of the time, you must also own the car rather than lease it, but this is not always the case.

Other tax ramifications of the leasing vs. buying a car argument will also come into play. By participating in our Tax Tuesday Webinar and speaking with one of our tax planning specialists, you can find out more about which circumstance might be ideal for you.

How many EV tax credits are available for use?

For each eligible car, you may only submit a single credit claim. The tax credit must be applied for in the same calendar year that you buy and start using a new fully electric, plug-in hybrid, or two-wheeled vehicle.

However, you can still apply for the tax credit for the other vehicle even if you buy a different qualifying fully electric or plug-in hybrid vehicle in a different year or two different qualified vehicles in the same year. In that respect, it is not a once-in-a-lifetime tax credit.

Can you use the EV tax credit more than once?

They can each claim the credit for their respective autos if two people living in the same home buy electric cars for themselves. The credit can only be used once if the two buy an EV together.

Top stories for August 24 include FOX Business Flash