Proposed Legislation Would Remove EV Tax Credit Limit
Aug. 2, 2022—A proposed legislative package aimed at reducing the federal deficit could help automakers sell more EVs.
The Inflation Reduction Act of 2022, a proposal backed by Democrats and constructed using revived parts of the Build Back Better plan, aims to address "climate change and energy security spending that will have a direct effect on the vehicles we buy and drive," according to Car and Driver.
Part of the plan would involve removing the cap on EV tax credits automakers can offer; currently, automakers can only offer those $7,500 credits on the first 200,000 EVs they sell.
If the IRA passes — and that is a big if — credits would no longer be tied to individual automakers but instead "would continue for all qualifying EVs" through Dec. 31, 2032. It would also add a tax credit to used EVs for the first time as well, giving customers up to $4,000 or 30 percent of the vehicle's value, whichever is smaller. On both new and used vehicles, consumers would be able to get the credit immediately, either as a down payment or price reduction.
The IRA would also place an income cap and vehicle price cap for credit eligibility — for new trucks, SUVs and vans up to $80,000 and all other vehicles up to $55,000, income caps are set at $150,000 for single filers and $300,000 for joint filers.
For used EVs that cost up to $25,000 and are at least two years old, the income caps are set at $75,000 for single filers and $150,000 for joint filers.
Lastly, the IRA would also require automakers to use "critical minerals" for their EV components that were either processed in North America "or a country the U.S. has a trade agreement with."
"The bill requires qualifying clean vehicles to use a minimum amount of such minerals, starting at 40 percent for vehicles put into service before January 2024, then going up by 10 percent a year until it reaches 80 percent for vehicles placed in service after December 31, 2026," according to the report.