It’s been a long time coming, but the Biden Administration has just passed the bulk of its climate agenda, the Inflation Reduction Act (IRA). But was it worth the wait? And will the IRA really make it cheaper and easier to go solar in your home? What about battery storage, I hear you say! Heat pumps? Electric cars? And should we be worrying about minerals? We’ve got you covered, with answer to all this and more.
This is the first post in a 4-part blog series breaking down what you need to know about the 2022 Inflation Reduction Act (IRA). In today’s post, we’ll address questions about Electric Vehicle Credits!
One of the ways the IRA is aiming to reduce the US carbon footprint is by offering incentives for consumers to purchase electric vehicles (EVs). The EV tax credit starts at the beginning of 2024 and offers up to $7500 on new EVs and $4000 on used EVs. The IRA not only keeps the EV tax credit in place until the end of 2032, but also allows you to use this tax credit as the down payment on your vehicle purchase.
Does your household qualify?
In order to qualify, you must make less than $150,000 annually, or, if married, less than $300,000 combined. Additionally, the retail price of the EV must be less than $55,000 for a car, and $80,000 for a van, truck, or SUV.
One particularly exciting development is the new $4,000 tax credit now available for 30% of the value of used EVs worth less than $25,000. With the initial cost of EVs often putting people off, this tax credit just made things a lot more affordable – even before you factor in the huge savings on gas! A great way to save even more money on an EV is to install a solar charging station at home! With the addition of the Clean Energy Credit (formerly the Federal Solar Investment Credit, or ITC) extending to battery storage, this is a double incentive! (More on that credit in our next post!)
Could your next vehicle be an EV?
Another perk of the IRA is that the 200,000 cap on manufacturing EVs has been lifted. Tesla, GM, and Toyota are the only manufacturers who currently reach this cap, but more may do so in the coming years as the market expands, so this hopefully ensures you have plenty of options available to you!
So, is it all good news for your home and your car?
There’s maybe one catch… to get the full $7,500 credit, the vehicle’s battery must have a fixed percentage of key minerals mined or processed in the US, or by a US trading partner. A fixed percentage of the battery’s inner workings must also be manufactured or assembled in North America. If only one of these boxes are ticked, the vehicle only qualifies for half of the tax credit – worth $3740. Some climate and industry pundits are already questioning how workable this is, so it is something to watch at the start of 2023, when the requirements come into effect.
Check out our next post in this series on the Federal ITC extension and other credits available with the IRA!