The federal government has announced changes to the Federal Tax Credits for Electric Cars 2024, one of the most commonly requested subsidies. If you have purchased an electric vehicle or intend to do so (yes, also in the first case) this is an opportunity to receive a significant amount of money and minimize the initial investment. We tell you everything you need to know to apply for it and take advantage of it.
The Federal Tax Credit for Electric Cars, a measure that comes from far away (and has been copied by us)
The federal government has offered tax credits for electric vehicles (EVs) for over a decade to incentivize American drivers to go electric. These credits help make EVs more affordable and encourage EV adoption to reduce dependence on fossil fuels.
Up until now, most new EVs have qualified buyers for a $7,500 federal tax credit under the Qualified Plug-In Electric Drive Motor Vehicle Credit program. However, this program is expiring and major changes are coming in 2024 under the newly enacted Inflation Reduction Act.
The IRA ends with the previous program, this will be the new one you can apply for
Starting in 2024, the existing electric vehicle tax credit will be replaced by a new Clean Vehicle Credit. This new credit was established as part of the Inflation Reduction Act passed in 2022.
The previous credit provided up to $7,500 for the purchase of a new qualified electric vehicle. However, that credit had a 200,000 vehicle per manufacturer cap, which caused several major automakers like Tesla and GM to hit the cap already, eliminating the credit for future purchases from those brands.
The new Clean Vehicle Credit removes the 200,000-vehicle cap, so there will no longer be limitations based on the automaker. Instead, eligibility will depend on the final assembly location, battery components, and price of the specific vehicle model purchased.
This switch to the Clean Vehicle Credit marks a major change in federal incentives for electric vehicles beginning in 2024. Consumers looking to buy an electric car will need to understand the new requirements to determine if they still qualify or not.
This is how the credit amount changes with the new Clean Vehicle Credit: pay attention to what you will now be able to receive
The new clean vehicle credit provides up to $7,500 based on the capacity of the battery and where its components were manufactured. The amount of the credit will vary depending on the percentage of battery components sourced from North America.
The full $7,500 credit requires final assembly in North America. It also requires:
- 40 % of battery components manufactured or assembled in North America by 2023
- 80 % by 2024
- 100 % by 2025
The credit aims to incentivize domestic manufacturing and build up battery supply chains in North America. Consumers will need to research manufactures to determine the likely credit amount for a specific electric vehicle model and year.
The percentage thresholds will increase annually up to 2025. Additionally, each manufacturer has a cap on the number of qualifying vehicles sold – once the cap is reached, that automaker’s vehicles will no longer be eligible.
Once again, the government is once again modifying an essential subsidy for Americans, although now they have done it for the better. The Federal Tax Credit for Electric Cars 2024 will continue the path of the previous year, with an important investment for those who bet on zero-emission vehicles. The decarbonization of transportation continues to be a priority, also for consumers in our country.