What are EV tax credits and how do they work?
The Inflation Reduction Act includes tax credits for EV, we took a look at how they can be claimed.
Under the Inflation Reduction Act (IRA) lawmakers included a tax credit to encourage those in the car market to go with an electric vehicle (EV). A good chuck of the emissions reduction that is expected from the new law are based on the passage of the IRA relates to the increased presence of EVs on the road.
One of the ways in which lawmakers who support the Green New Deal hope to entice automobile manufactures into producing EVs and create good paying jobs in the process is by offering a tax credit. This type of measure is not included in the IRA, but companies who build EV charging stations could claim the credit so long as they “pay prevailing wages and hire registered apprentices, ensuring local wages are not undercut by low-road contractors.”
For households and families
The IRA does include a tax credit up to $7,500 for those who purchase a new EV and $4,000 for a used one. The median price of a new EV is $54,000 according to Inside EVs.
When speaking to how the legislation will help young Americans, the White House said that these tax credits “could [help them] buy their first car and skip the gas pump forever.”
However, $54,000 is a steep price compared to more fuel efficient sedan options for those in the market for a new car. Additionally, with the urban population in the United States growing to around eighty-three percent, many young people may have preferred the government invest in public transit systems to reduce the amount of cars on the road in general, rather than just tho
se that consume fuel.
All together the EV tax credit is expected to save households around $950 a year. This is unlikely to lower to middle income households making under $50,000 as this group only makes up around fifteen percent or car owners.
How do I claim the credit?
Buyers should also be aware that not all EVs are eligible for the tax credit and those in the market should ensure their chosen vehicle falls under the legislation. Once an eligible has been purchased, the buyer will need to obtain a Letter of Certification from the dealership. Then, Form 8936 must be submitted to the IRS. Simple as that.