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.
Per the U.S. Department of Energy, the Ioniq 5 obtains a combined 110 MPGe. 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.
In This Article...
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.
Top stories for August 24 include FOX Business Flash
Following modifications to the U.S. federal electric vehicle tax credit that disqualified all of its South Korean-made EVs, a new report claims that Hyundai is aiming to build its forthcoming Georgia manufacturing faster than anticipated.
The automaker unveiled plans to build the $5.5 billion factory outside of Savannah in May. The factory will have a production start date of early 2025 and the ability to build up to 300,000 vehicles yearly.
According to recent reports from Yonhap, Hyundai is speeding up the process and will begin construction this year in order to open the facility in the second half of 2024, according to sources familiar with the plan.
Before the Inflation Reduction Act, which was signed into law last week and instituted a requirement that qualifying vehicles be built in North America, instituted a $7,500 federal tax credit and made all-electric vehicles eligible, Hyundai had several models, including the Ioniq 5, which was named the 2022 World Car of the Year.
About 70% of the electric and plug-in hybrid models currently for sale, along with Hyundai’s vehicles, were ineligible from the credit.
The Ioniq 5 from South Korea is no longer eligible for the federal EV tax credit in the United States. (Fox News / Hyundai)
This week, Volkswagen and Mercedes-Benz signed a contract with Canada to obtain minerals from that nation, which would allow their U.S. manufacturing of electric vehicles comply with the new regulations governing the place of origin of battery materials. Volkswagen will soon start delivering its Tennessee-built ID.4 electric SUV, enabling it to be eligible for the credit, after starting out with German-built automobiles.
Volkswagen is now eligible for the credit because it has begun making the ID.4 electric SUV in Chattanooga, Tennessee. (Fox News/Volkswagen)
The new regulations stipulate that suppliers must be based in North America or any nation with which the United States has free trade agreements, excluding China.
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.
Is a tax credit available for the Toyota Rav4 Prime?
President Biden eliminated a long list of automobiles from the federal electric car tax credit on Tuesday with the stroke of a pen.
It’s likely that no vehicles will be ready to comply with the battery standards by the end of the year, according to the Alliance for Automotive Innovation, the trade association that speaks for the majority of automakers who sell cars in the United States.
Federal tax credits for the Chevrolet Bolt EUV won’t be available until at least January 1, 2023.
Vehicles from General Motors and Tesla won’t be eligible once more under the new regulations until 2023, having used up their credits under the previous policy that phased them out after 200,000 units were sold.
Through the end of 2022, all Ford F-150 Lightning models will be qualified for the full federal tax credit.
However, regardless of when the car is actually delivered, anyone who had signed a legally binding purchase agreement before the law was passed is still eligible to claim the credit under the previous system.
The Energy Department warns that some models are created in numerous regions and that only the North American-manufactured examples are qualified and provides the following list of the only vehicles that are now available that qualify:
Volkswagen’s facility in Chattanooga, Tennessee, has also begun producing the ID.4, and sales of qualifying vehicles are anticipated to commence before the end of 2022. The list will be updated as new vehicles are registered and currently contains certified vehicles filed until August 1.
Can a hybrid vehicle qualify for a tax credit?
A federal income tax credit of up to $7,500 may be available for new all-electric and plug-in hybrid vehicles purchased in 2010 or later. The credit’s value will change depending on the vehicle’s battery’s capacity. There may also be incentives from the state or locality.
Small neighborhood electric cars may be eligible for another credit, but they are not eligible for this one.
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.
Refundable EV tax credits?
If your vehicle satisfies certain requirements, you may be eligible to claim the qualifying plug-in electric drive motor vehicle credit (the electric vehicle credit is the name of an expired credit). It is worthwhile to take the time to find out whether you are eligible because the credit for electric vehicles may cover up to $7,500 of your vehicle purchase costs.
If the automaker has already sold a particular number of cars, the value of this credit can be lower. It is no longer offered by several manufacturers. See the Manufacturers Index published by the IRS. Furthermore, you won’t get a refund for the credit’s unused half because it is not refundable. The credit cannot be carried over to your tax return for the following year.
These requirements must be met in order to be eligible for the qualifying plug-in electric drive motor vehicle credit:
- You are the car’s owner.
- It was put into use during the current tax year.
- You were the one who first used the car.
A four-wheeled vehicle needs additionally:
- possess a car with a gross weight under 14,000 pounds
- primarily be powered by an electric motor that receives power from a battery that:
- has a minimum four kilowatt-hour capacity.
- can be recharged using an external power source.
- be recognized as being eligible for the electric vehicle tax credit.
The tax credit is available for a two- or three-wheeled electric vehicle if it:
- Is a new car two wheels or three?
- can go at a speed of at least 45 mph.
- is significantly propelled by an electric motor.
- A battery with a minimum 2.5 kilowatt-hour capacity is used to power the motor.
- able can be charged by an outside power source
- has a car that weighs under 14,000 pounds
How are tax credits calculated?
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.
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);
Do tax credits merit the cost?
Before determining how much tax you owe, deductions might lower the amount of your income. Credits can boost your tax refund or decrease the amount of tax you owe, and some credits may even offer you a refund even if you owe no tax.