$7,500 IRS Credit: Who is it for and how to apply
President Biden’s Inflation Reduction Act offers a significant tax credit for owners of electric vehicles to help reduce reliance on fossil fuels.
In an attempt to move the United States toward sustainability, the Internal Revenue Service (IRS) is offering a tax credit of up to $7,500 for Americans who purchase an electric vehicle (EV) going forward.
The credit was inhanced in the Inflation Reduction Act passed by President Joe Biden in 2022. Through this legislation, the government allocates more than $370 billion in subsidies for technologies solar, wind and electric cars. The law went into effect January 1 and can be used to finance a new vehicle, as well as install solar panels or upgrade your electrical systems.
$7,500 IRS Credit: Who is it for and how to apply
In accordance with the provisions of the legislation, for a person to be eligible for a credit of up to $7,500 they must have had an income of less than $150,000, or $300,000 for couples.
It is worth mentioning that the credit only covers electric vehicles with a value of up to $55,000 or up to $80,000 for trucks. While buyers can receive up to $7,500 of the credit, keep in mind that there are a series of additional requirements that must be satisfied to receive the full entitlement. The benefit amount is gradually reduced for each requirement the car does not meet.
You can claim the credit using Form 8936 on your tax return, making sure to provide the VIN of your vehicle in your filing.
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Which vehicles are eligible for the EV tax credit?
According to the Department of Energy, 29 electric models are currently manufactured in the US, courtesy of the following automotive brands: Audi, BMW, Chevrolet, Chrysler, Ford, GMC, Jeep , Lincoln, Lucid, Nissan, Rivian, Tesla, Volvo, Cadillac, Mercedes and Volkswagen.
For a vehicle to be eligible, it must:
- Have a battery capacity of at least 7 kilowatt hours
- Have a gross weight class of less than 14,000 pounds
- Be manufactured by a qualified manufacturer
- Be a new vehicle
- Not exceed the value limits mentioned above
The IRS provides this list of vehicles eligible for the tax credit of up to $7,500 from the IRS.
Vehicles purchased on or before 16 August 2022, may be eligible for a $7,500 tax credit as well. However, the eligibility requirements are different. After that date, a final assembly in North America requirement was added.