We Buy All Cars, Running or Not!

How Does the Electric Car Tax Credit Work? All You Need to Know

Does Donating A Car Help With Taxes

Understanding “how does electric car tax credit work” helps you enjoy extra money in your tax return at the end of the year or a discount when purchasing your EV. However, your EV must meet certain requirements to be eligible for the new EV tax credit.

Auto Repairs Are EXPENSIVE


More people are now planning to switch to electric vehicles (EVs). They can enjoy many things about these EVs, including the newly added features, cleaner energy, and interesting rides.

One of the coolest things about these EVs is that you can enjoy a tax credit after purchasing a zero-emission car or a car that does not produce any pollution, which is those relying on electricity to run.

The tax credit for electric vehicles is not new, and it's been there for a long time. However, the newly signed bill or the Inflation Reduction Act signed in August 2022 added more cars to the pool of tax credits. As a result, there have been some changes that you need to keep in mind if you're planning to enjoy the electric car tax credit.

This article provides all you need to know about how the electric car tax credit works. In addition, it highlights the main changes in the Inflation Reduction Act, along with some details you should keep in mind when purchasing a new electric car while considering the tax credit.


Can Car Repairs Be Considered a Deduction on Your Taxes

What does the Inflation Reduction Act include for new electric car tax credits?

The electric car tax credit is not new; many cars have been eligible for tax credits over the last few years. However, the Inflation Reduction Act added some more details and restricted what vehicles are eligible for this tax credit and what is not.

In short, here's what is new in the electric vehicle tax credits as of 2022:

1.    More electric vehicles are now eligible

The biggest change in the inflation reduction act regarding the electric vehicle tax credit is that more vehicles are now added to the pool, and there are eligible for the tax credits. So, for example, there is a list of not only electric cars but also certain plug-in hybrid cars and hydrogen-powered vehicles that meet certain qualifications.

2.    Up to $7500 of tax credit

The amount of credit you can receive from purchasing an electric car can go up to $7500 now, which is a great deal for those planning to purchase an electric car.

3.    Upfront discounts

Did you know that with the Inflation Reduction Act, you can enjoy the tax credit upfront, which means you can get a discount right after you purchase a vehicle rather than waiting till the end of the year to get the tax return?

Not every vehicle is allowed for the upfront discount, and it's only cards with certain criteria made in 2022 and 2023.

Note that some dealerships might not immediately provide you with a discount, and you might want to check with them before making a final purchase decision. However, remember that even if the dealership did not allow you to get the discount, you could still get the tax credit at the end of the year.

4.    Very expensive EVs are not eligible

The biggest change and the electric vehicle tax credit is that very expensive vehicle are no longer eligible for this benefit. According to the Inflation Reduction Act, Vehicles that allowed for the electric vehicle tax credits include low-emission trucks, vans, and SUVs with a retail manufacturer price of up to $80,000 and regular cars with a price of up to $55,000.

This price cap puts many common electric vehicles out of the qualification for electric car credits.

Therefore, you must check the list of eligible vehicles before deciding on your dream car. The last thing you want to do is to assume that you will enjoy the tax credit at the end of the year but then realize that your vehicle is not qualified. To pick up the other things to consider depending on your urine, some cars might be eligible this year but not next year.

Those who are very careful when reviewing the list will understand whether you should buy today or wait longer. New paragraph experts mentioned that if you see a vehicle listed as eligible for the EV tax credit this year, you might not want to wait for the next year because it might go out of the list.

5.    Manufacturers don't have a limit

Before the Inflation Reduction Act, manufacturers had a limit on how many vehicles they could provide with the electric vehicle tax credit. However, now there is no limit, and as of January 2023, manufacturers like Tesla and GM don't have incentive limits. As a result, they no longer have to stick with the 200,000 vehicles cap to provide the tax credit.

This is a great deal because you don't have to be worried about purchasing your vehicle and realizing that you're out of the qualified people for the tax credit just because you were customer number 200,001 who came to purchase a Tesla.

6.    Use electric cars tax credits

Purchasing a brand-new electric vehicle might not be something everybody can afford. This is extremely challenging, especially with the increased car prices in 2022.new paragraph, the good thing is that with the Inflation Reduction Act, now used electric vehicles are also eligible for tax credits up to $4000.

Remember that not every used vehicle is allowed to enjoy this benefit, and not everyone is qualified. In addition, you must have a combination of income and other types of limits along with electric vehicle prices to qualify for this tax credit.

For example, the Inflation Reduction Act mentioned that your vehicle must be under $25,000, be two model years old, and be purchased through a dealership.

The other thing to keep in mind is that the used electric car tax credit is only allowed once every three years, and you're going to have to be an individual who makes up to $75,000 or a head of household who makes up to $112,500 and a joint couple who make up to $150,000.

7.    Ineligible cars are now eligible

Over the years, some electric vehicles were not qualified for their new electric car tax credit. However, these vehicles are now allowed and qualified as of the Inflation Reduction Act.

8.    Manufacturer's locations rules

One of the most critical additions to the Inflation Reduction Act electric vehicle tax credit is the manufacturing location. Unfortunately, not all cars are eligible for the new electric car tax credits unless made in North America.

The whole vehicle must be completely made in North America. So, for example, if you're buying a vehicle with a Chinese-made battery, then this vehicle is not qualified.

You can't get an electric vehicle tax credit if you're leasing a car

Even with the new inflation reduction laws, if you're leasing an electric car, you can't claim any of those tax credits.

9.    Eligible hydrogen fuel cell cars

The whole idea of the changes in the Inflation Reduction Act regarding electric vehicle tax credit is to encourage people to use cleaner energy. Therefore, it's not surprising that hydrogen-fueled cars are also eligible for the 7500 tax credits if they meet the manufacturer location requirement and other details.

Stimulus Bill

Are there any local incentives to consider for electric vehicles?

As you notice, the federal effort pushes towards using more I looked at vehicles to protect the environment and tackle climate change. There are, however, some local state programs and recommendations that you can take advantage of, which also produced some incentives for people driving electric vehicles.

For example, you might find certain single-occupant carpool lane access stickers, exemptions from registrations, inspection fees, tax credits, reduced vehicle taxes, and others.

For instance, New Jersey and California are known for supporting electric vehicles. In New Jersey, you'll get sales and other tax exemptions whenever you buy a new 0-emission car. Also, you can enjoy up to $4000 when you lease or buy a new electric vehicle or even a plug-in hybrid car.

Unfortunately, not every state is ready to provide these incentives, and some other states might not even have any programs. For instance, Idaho, Wyoming, and Kentucky are those states that do not yet support any lot of vehicle programs.

Local electric utility incentives

Did you know that you might enjoy some incentives through your local electric utilities?! Yes! Along with various federal and state level encouragements and programs, certain utilities provide some discounts.

For instance, the Nebraska public power district provides you a $4000 rebate for those who buy and have no electric vehicle.

We're expecting that more of these programs will show up in certain states as people get more familiar with electric vehicles and as more people drive electric cars.

New EV Tax Credit

Why is a huge push towards driving electric vehicles?

One might wonder what's going on about electric cars and why we're seeing all these incentives and other pushes throughout the nation towards driving more electric vehicles.

The short answer is that the whole idea behind driving electric vehicles is to produce cleaner energy and to protect the environment. But unfortunately, if you don't already know, vehicles produce a major portion of pollution that impacts the overall air quality. There are some areas around the world where you cannot breathe for 30 minutes without getting significantly sick.

There are dying everywhere just because of the air pollution and starting with some changes in the way we live helps protect the environment again prevents this lotion pure new paragraph there are many pushes worldwide towards protecting the globe from the issues related to emissions coming out of the automobile.

We've seen some programs before regarding some tax credits to encourage people to drive electric vehicles. However, the newly signed Inflation Reduction Act is a significant federal push towards driving vehicles that rely on cleaner energies.

The other thing is that some states are even taking it to the next level and trying to ban gasoline cars, like what happened in California and Washington. As of 2035, new gasoline vehicles are banned from production in these two States and worked and seen more and more states moving in this direction.

How Gas Prices Are Affecting the Electric Car Market

What to do with my gasoline car?

As you might notice, there is a huge deal that you can take advantage of when buying an electric car. However, if you already have a good and working gasoline car or if your gasoline cars are not working perfectly, what will you do?

The good answer is that if you're really interested in switching to an electric vehicle, it might be a perfect time to sell this gasoline car and use its value towards purchasing the electric vehicle.

If you're struggling with fighting the best buyer for your gasoline car, Cash Car Buyer can be a massive help!

Our team of experts can help you get rid of your gasoline car in no time! But, did you know that we can remove your car within one to three days?

Reached out to our team today and give us a call at 866-924-4608!

how to sell my car in Scranton PA

Final thoughts

There is a huge push nationwide toward driving more electric vehicles. This includes the old tax credits for electric vehicles, the new changes in the Inflation Reduction Act, the States and local governments' incentives, and even the local electric utility incentives.

This article walked you through all the changes in the Inflation Reduction Acts regarding the electric car tax credits. Therefore, you should have a better answer for how does the electric car tax credits work now and after the Inflation Reduction Act bill was signed.

If you are ready to switch to a new electric vehicle, it could be a perfect time to get rid of your gasoline car and sell it. Are you looking for someone to buy your gasoline car? Why don't you reach out to Cash Cars Buyers today!

Cash Cars Buyer is one of the top-rated car removal companies in the nation that guarantees to pay you the top dollars and provide you with free towing despite your living location around the United States.

Our process is very straightforward and doesn't take more than a couple of days to get your car removed safely and for the most money.

All it takes you is to:

  • Describe your car's type and condition
  • Receive our instant free quote
  • Accept the quote
  • Get your car removed and receive your cash payment on the spot!

To learn more about our process and our team, you can reach out to us by calling us at (866) 924-4608 or by visiting our home page click on the free instant online offer.

© 2022 Cash Cars Buyer. All Rights Reserved. Terms & Conditions | Privacy Policy | Sitemap