According to the Inflation Reduction Act, more vehicles are now qualified for the new EV tax credit in 2022. However, the requirements are now more challenging, and the $7500 tax credit is split into two parts depending on the battery minerals and components.
The inflation reduction act (IRA) was signed recently by The United States president to become one of the largest bills focused on climate change and other health sector-related topics. It's one of the biggest and most important topics related to the auto industry because of what it holds for car buyers and current shoppers of electric vehicles.
Electric vehicles became part of the public roads for a very long time, and they're getting more popular as gas prices skyrocket. As a result, many people are now driving electric cars and are more interested in purchasing such vehicles.
You might already know that some tax credits are available for those who purchase electric vehicles. This means you can get some money back at the end of the year once you purchase specific electric vehicle brands.
With the new Inflation Reduction Act, more vehicles are now eligible for tax credits while others are no longer eligible. Therefore, if you're planning to purchase an electric car, this article would be extremely important to you.
This article will provide detailed information about what's included in their inflation or duction act and what changes are happening to their existing electric vehicle tax credit as of 2022.
What's the EV tax credit?
Before we dive into the details and discuss what's included in the new inflation reduction act about tax credits for electric vehicles, we must understand what is the electric vehicle tax credit in the first place.
The electric vehicle tax credit refers to and new federal incentive that's put together specifically to encourage customers to buy more electric vehicles. The whole goal of this incentive is to get more people to drive Electric cars and stop using some of the nonrenewable energies like gasoline.
Many people are very confused about this tax credit, and they think it's a check you will receive in your mail after purchasing the elixir car. However, as the name suggests, this is a tax credit which means you'll receive a tax credit of up to $7500 after you file your taxes in the same year you purchased your electric vehicle.
Remember that not every electric or plug-in car is eligible for the same tax credit. Therefore, the easiest way to understand what car you're planning to purchase is eligible for a tax credit is to check the US department of energy's website. They should have detailed information about what each vehicle will receive in tax credit.
Facts about electric vehicles
If you look at the details about the current facts of electric vehicles in the market, you'll be fascinated by the number of people purchasing them. Of course, we might know that many customers are interested in purchasing this vehicle, but looking at the numbers and reading through the facts can be extremely interesting.
Here are some of the fun facts about the current markets for electric vehicles:
1. According to Automotive News, about 4.6% of all new registrations in the first part of 2022 is for electric vehicles.
This is very interesting, and it sounds like more people are now pushing to purchase electric vehicles than before. However, although these people might be interested and protecting the environment and using these high-tech vehicles, the biggest driver for this increase could be the extremely high gasoline prices that pushed people away from the typical gasoline vehicles.
2. The highest percentage of purchased electric vehicles is in California
California is taking the lead in the number of people purchasing electric vehicles. According to THE US Department of Energy, by December 31st, 2021, more than 39% of the registered vehicles were electric cars.
3. According to the International Energy Agency, once 2021 ended, 16.5 million electric vehicles were on the road.
The number of people riding electric vehicles increased over the years, and the year 2021 was one of the challenging years considering what happened to the car markets and the reduction in available cars, which pushed people to buy more electric vehicles than before as gasoline prices increased as well.
4. The highest number of charging stations is in California
Unsurprisingly, considering the increased number of people driving electric vehicles in California, you will see a corresponding increase in the number of charging stations in the same state. According to THE US Department of Energy, about 14,463 electric charging stations are available in California, and the following states are New York, Florida, and Texas.
New EV tax credit 2022: what changed?
Tax credits have been available for a couple of years now, and many people enjoy receiving these incentives after filing their taxes at the end of the year. However, President Biden signed a new massive bill, the inflation reduction act, last week. Although this bill is focused more on climate change and other medical-related topics, a big portion of this bill focuses on the electric vehicles tax credits.
The inflation reduction act is another massive federal government effort to encourage people to drive more electric vehicles. As we mentioned earlier, the goal is not to have fancy vehicles driving on the roads but to protect the environment long-term.
When more people are encouraged to drive electric cars, the gasoline pressure will significantly reduce. Therefore, these nonrenewable resources will be enough for future generations to enjoy.
What's in their inflation reduction act for electric vehicles? What changed?
Although we mentioned that the tax credits had been there for a good amount of time, there have been some significant changes to some of the electric vehicle tax credits. As a result, some vehicles are eligible for this tax credit while others are no longer eligible.
The bill states, “fight inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40 percent by 2030.”
How word of experts mentioned that although the bill still includes the $7500 tax credit for many new vehicles, the qualification and the requirements are now stricter to achieve the best emission reductions. As a result, finding a suitable vehicle for these incentives can be challenging.
Let's take a closer look at the breakdown of electric vehicles tax credit according to your vehicle's components:
5. The first half of the $7500 tax credit
The first tax credit is about $3750; to qualify for this tax credit, you must have specific requirements in the vehicle's battery minerals. In other words, the bill specified that your vehicle's battery minerals should be extracted from a specific location, either in the United States or in another country where it shares a free trade agreement with the United States.
6. The second half of the $7500 tax credit
To qualify for the second half of the $7500 tax credits, you get a focus on the components of the battery and learn more about where they came from. According to the bill, most battery components must be made in the United States, Mexico, or Canada. However, the bill also specified that these countries' qualified percent of required components would increase over the next years.
One of the biggest benefits of this new electric vehicle tax credit is that there is no limit on how many vehicles you sell in terms of manufacturers' perspectives. In other words, previously, any manufacturer selling more than 200,000 vehicles could not offer more electric vehicle tax credits. So this is a huge benefit to those manufacturers.
What to consider when shopping for an electric vehicle in 2022?
Once you hear the details about the current tax incentives and the new EV tax credits, you might be encouraged to buy an electric car. However, there are a couple of things that you got to keep in mind as you're shopping:
1. Does the vehicle qualify for the EV tax credits?
The updated information in the inflation reduction act allowed more electric vehicles to qualify for the tax credit. However, there is some news about certain vehicles that got removed, and based on the details we highlighted before, you will not be able to get the whole $7500 if you're not meeting certain criteria.
Therefore, the most important step for you as you shop for the new electric vehicle in 2022 is to do your research properly. First, check the giver rental websites and input information about your desired vehicle to understand whether this vehicle qualifies for the tax credit or not.
2. How much should I pay?
Electric vehicle prices are not low, and with what's happening with the gasoline cars markets, the prices are also skyrocketing. Therefore, many manufacturers are taking advantage of their customers, so you have to research and look for multiple offers before making your final decision.
Buying a vehicle is one of the highest investments you will make after purchasing a house. Therefore, it is worth being patient and doing detailed research before making your final purchase decision.
3. What do people say about this vehicle?
When you're like a car, it is worth reading through some of the customer's feedback about what they think of this car. For example, there are tons of forums and other larger websites that allow you to read through some of the common problems of these vehicles or other surprises customers had to deal with when purchasing this car.
By being proactive and understanding what you're expected to face, you make an informed decision, and you will buy a car that is worth the money.
What should I do with my old car?
If you have old gasoline or electric car, it might be a perfect time to sell it and use its value to buy a new vehicle. With the current shortage in the car market, you'll be fascinated by the number of people interested in purchasing used cars.
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Electric vehicles are no longer purchased for fun or to try something high-tech and new. Instead, the US government has been encouraging people to ride more electric vehicles to protect the environment and reduce emissions.
As of August 2022, President Biden signed the new Inflation Reduction Act, which includes information about new EV tax credits that allow more cars to receive up to $7500 of tax credits for certain electric vehicles that qualify.
According to automotive experts, the Inflation Reduction Act's new requirement is a little stricter, making it challenging for customers to find qualified vehicles. Therefore, if you're planning to buy an electric vehicle hoping to receive this tax credit, you must go through the right resources to determine whether this vehicle qualifies or not before wasting your money.
If you are done with your old gasoline car or have another electric vehicle that is giving you a hard time, it's always a great time for you now to sell it and use the money to buy a better car that qualifies for its new EV tax credits.
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