IRA incentives explained
When will they make a difference in the purchase of your next EV?
By Bill Trueit, Member of EVA Policy Committee, and President OF Snohomish County EVA
Over $28 billion in manufacturing investments for electric vehicles (EVs) and EV battery plants have been announced since President Biden signed the Inflation Reduction Act (IRA) into law on August 16, 2022.
The IRA provides up to $7,500 in federal incentives for EVs through 2032. As with previous credits, caps are in place on the price of the vehicles as well as on the personal income of those who purchase them.
Unlike previous federal credits, rebates are not limited to the sale of 200,000 units of any single model. For the first time, all used EVs will be eligible for a $4,000 federal incentive if the car is 2 years or older and valued at $25,000 or less.
The most significant change to the federal incentives includes the requirement for the final assembly of EVs to be completed in North America. That alone, however, will not guarantee a credit.
To qualify for the full $7,500 credit for personal EV ownership, vehicles must now meet requirements for “critical minerals” and battery components, each of these two categories good for $3,750 of the total. It is widely expected that it will take some time for manufacturers to fully meet these standards.
EVA comments on IRS regulations
During October and November, the EVA Policy Committee lead by Guy Hall met to draft a response to the Internal Revenue Service (IRS) request for public comments with regard to the drafting of IRS regulations to oversee the implementation of the IRA.
Guiding principles submitted by the committee called for regulations to be simple, dependable, easy to access, and equitable. The committee also recommended that EV incentives be closely aligned with other regulatory agencies to avoid different classifications between agencies.
For example, the National Highway Traffic Safety Administration categorizes motor vehicles by weight while the EPA defines vehicles by interior volume. Depending on classification, a new model EV can qualify for federal credit if priced at $80,000 or less as a van, SUV, or pickup. All other new 4-wheel vehicles are eligible for the federal credit if priced at $55,000 or less.
The committee also recommended that a system be established to communicate to the public in advance of vehicles eligible for tax incentives. This was intended to avoid models moving in and out of eligibility as critical mineral and battery component supplies potentially change during the production cycle of a given model year.
Investment in manufacturing for EVs and batteries grew significantly after the IRA was approved. How the bill will stimulate EV sales in the near and long term remains to be seen.
Visit the Department of Energy’s Alternative Fuels Data Center to learn if a particular EV is currently available for IRA incentives.