September 20, 2022

What To Know About the Plug-In Electric Drive Vehicle Credit

In August, the IRS posted new guidance for current and future owners of electric vehicles, outlining the tax benefits available. If you are interested in claiming the tax credit available under section 30D (EV credit) for purchasing a new electric vehicle after Aug. 16, 2022 (which is the date that the Inflation Reduction Act of 2022 was enacted), a tax credit is generally available only for qualifying electric vehicles for which final assembly occurred in North America — the so-called final assembly requirement.

The IRS notes that the Department of Energy has provided a list of Model Year 2022 and early Model Year 2023 electric vehicles that may meet the final assembly requirement. Because some models are built in multiple locations, there may be vehicles on the Department of Energy list that do not meet the final assembly requirement in all circumstances.

To identify the manufacture location for a specific vehicle, advises the IRS, please search the vehicle identification number of the vehicle on the VIN Decoder website for the National Highway Traffic Safety Administration. The website, including instructions, can be found at VIN Decoder.

Watch the dates

What if you purchased a vehicle before Aug. 16, 2022? If you entered into a written, binding contract to purchase a new qualifying electric vehicle before then but did not take possession of the vehicle until on or after that date (for example, because the vehicle had not been delivered), you may claim the EV credit based on the rules that were in effect before Aug. 16, 2022. The final assembly requirement does not apply before Aug. 16, 2022, says the IRS.

If you purchase and take possession of a qualifying electric vehicle after Aug. 16, 2022, and before Jan. 1, 2023, explains the IRS, aside from the final assembly requirement, the rules in effect before the enactment of the Inflation Reduction Act for the EV credit apply (including those involving the manufacturing caps on vehicles sold).

The feds are pushing EV

The tax breaks are not the only reason to by an electric vehicle. In September remarks in Detroit, President Biden said, “As part of the Infrastructure Law, we’re investing $7.5 billion to build electric vehicle charging stations all across America.  So, today I’m pleased to announce we’re approving funding for the first 35 states, including Michigan, to build their own electric charging infrastructure throughout their state.”

For more details on the tax breaks, read the full IRS guidance and consult with a qualified tax adviser.

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