The Inflation Reduction Act is a landmark piece of legislation signed into law by the President in August 2022. Lawmakers focused a lot of their attention on emissions reduction and offered some incentives to help with the sales of electric vehicles. This involved a tax credit for those who want to purchase a used EV.
But what’s in the details, and how could you take advantage of this incentive?
What Are the Rules?
Consumers can now take a tax credit of up to $4000 (or 30% of the vehicle’s price) when they buy a used EV. The rules also place a price cap of $25,000 on eligible vehicles.
Some rules are yet to be clarified, and it’s still unclear how many different models may qualify. Nevertheless, it’s a big leap forward from the status quo, where used EVs did not qualify for any kind of tax benefit before. However, one thing is clear: a used EV will only qualify for a tax credit if the manufacturing process includes final assembly in North America.
The new tax credits become available on January 1, 2023. Starting in 2024, the credit will be applicable when you purchase a vehicle and will be an immediate discount on the purchase price. Upon purchase, the system will transfer the credit to the seller, who can claim the tax deduction later.
What Does This Mean for Me?
If you want to buy a used car using this credit, additional rules relate to buyer eligibility. For example, you may lose the tax credit based on your adjusted gross income level or tax filing status. These limits are $75,000 AGI per single filer, $112,500 for a head of household, or $150,000 for a married person filing jointly.
There are some additional rules to consider:
- Only vehicles that are at least two model years old from the purchase date can qualify.
- Private sales do not qualify, so you must purchase from an authorized dealership.
- A used EV can only qualify for the tax credit once.
How Can I Take Advantage of the Tax Credit?
If you want to take advantage of the used EV tax credit, talk with your dealer as soon as possible. Remember that there may be a limit to the list of eligible vehicles, and there is likely to be high demand.
If you’re more interested in buying a new EV model, drive by VinFast and check out our models.
What do you think about this tax credit? Will you take advantage of it, or does it persuade you to buy a used EV? Let us know in the comments below.
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