The Lowdown on the IRS Electric Vehicle Tax Credit

Key Takeaways

• The EV tax credit has changed per the Inflation Reduction Act
• For now, fewer vehicles actually qualify for the full credit amount
• This is the latest change in the constantly evolving EV landscape

The landmark Inflation Reduction Act (IRA) encompassed a number of financial provisions, including some tightening adjustments to the electric vehicle (EV) tax credit requirements.

We’ll take a look at what’s changed and what that means for you as a potential EV-buyer or an EV-investor below.

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What (and who) qualifies?

First, there’s an income cap. For folks who are single or married but filing separately, it’s $150,000. For heads of household it’s $225,000, and for married couples filing jointly it’s $300,000.

The car itself also has a price limit. For passenger cars, you have to pay $55,000 or less to qualify. For vans, SUVs and light trucks, that number goes up to $80,000.

Effective in 2024, vehicles containing battery parts from “a foreign entity of concern” will no longer qualify for the credit, so you’ll need to really check the manufacturing details.

Ok, so has any part of this gotten easier? Yes.

Previously, companies that had manufactured more than 200,000 were disqualified from the credit, but that limitation has been lifted. Also, starting in 2024, you can apply your tax credit at the point of sale — so go ahead and knock a little off the sticker price.

All of that said, even if you reach the requirements outlined here, the actual amount you’ll receive is “up to $7,500” and could be less, depending upon a number of technicalities and a sliding scale of eligibility.

It’s best to consult an exhaustive list of qualifying vehicles before driving an EV off the lot thinking you’re guaranteed a credit.

What does this mean for investors?

Even if you don’t drive an EV, you might invest in clean energy and EV technology (or want to), so here’s what you need to know:

Across the board, established automakers like, Ford and GM, are getting into the EV game in a big way. They aren’t making big money on EVs yet, but they are betting on a more electrified future.

This week, Volkswagen (VWAGY) announced plans to develop electric cars with Chinese startup XPeng Motors (XPEV). XPeng stock rose 26% Wednesday.

Global EV sales could become nearly a $1.4 trillion market by 2027. And it’s not just the cars. Keep an eye out for EV charging companies and other infrastructure innovators that are likely to grow in the coming years as well. The global EV charging infrastructure market is expected to reach $229.1 billion by 2030.

The bottom line

We’re not electrifying everything tomorrow, but the significant investments that both private companies and the government are making in EV advancement do point to long-term upside.

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