Clean Fuel News

New Requirements for Clean Car Tax Credits Under The Inflation Reduction Act (2022)

By: Elizabeth Linehan, Clean Cities Intern

Updated April 2023

The new Inflation Reduction Act (IRA) signed into law August 16, 2022 and due to go into effect January 2023 sets new expectations and requirements for the Clean Car Tax Credit, previously known as Qualified Plug-in Electric Drive Motor Vehicle Credit.

EV buyers can receive tax credits of $7,500 for a new EV or up to $4,000 on a used EV at time of sale, not at tax time. There are new strict requirements for the cars and buyers to qualify for these tax credits.

Rules to qualify for tax credit:

How to know if your vehicle will qualify under manufacturing requirements:

• Check your vehicles build location using the Vehicle Identification Number (VIN):
• The build location of a particular vehicle should be confirmed by referring to its Vehicle Identification Number (VIN) using the VIN decoder described below or an information label affixed to the vehicle. The U.S. Department of Transportation's National Highway Traffic Safety Administration (NHTSA) provides a VIN decoder that can be used to look up the vehicle's assembly location using these steps:

1. Enter the Vehicle Identification Number in the VIN decoder
2. Click the "Decode VIN" button.
3. Look for the country name in the "Plant Information" field at the bottom of the page.

• A list of vehicles assembled in North America, please see the Alternative Fuels Data Center Act page 
• Some popular EVs that qualify are (Forbes, 2022):
• Chevrolet Bolt EV
• Chevrolet Bolt EUV 
• Chevrolet Blazer EV
• Chevrolet Silverado EV
• Cadillac Lyriq (if classed as an SUV)
• Ford F-150 Lightning 
• Ford Mustang Mach-E
• Nissan Leaf
• Tesla Model 3 (base trim only) 
• Tesla Model Y (depending on options)
• Volkswagen ID.4 (but only models made in Tennessee)
•  

The largest concern for consumers is that this will significantly reduce the number of EVs and buyers that will qualify for the credit. There are a few elements of this plan that expand the pool though, namely that there is no longer a cap on sales for car manufacturers. This allows Tesla and General Motors, who previously hit the 200,000 sales threshold in 2018, to be able to produce cars that qualify now. Additionally, the stringent manufacturing requirements will encourage companies to build more in the USA, advancing local economies and reducing reliance on foreign providers such as China. 

**The full $7,500 EV tax credit is split up by a battery components requirement and a critical minerals requirement:

• $3,750 if the “vehicle is made with a battery manufactured or assembled in North America. This is based on a percentage of the value of components that will increase over time starting with 50 percent in 2023.”
• $3,750 if the “battery is constructed with critical minerals extracted in the United States or a country the United States has a free trade agreement with or recycled in North America. This is based on a percentage of components that will increase over time starting with 40 percent in 2023.”

Read more at:

https://www.forbes.com/wheels/news/new-clean-vehicles-tax-credit-evs-qualify/

https://www.irs.gov/businesses/plug-in-electric-vehicle-credit-irc-30-and-irc-30d

https://www.atlasevhub.com/weekly-digest/ira-to-unlock-billions-in-ev-funding/ 

Written with information from: 
Phoebe Lind, ICF
Technical Response Service
Provided by the U.S. Department of Energy and National Renewable Energy Laboratory
[email protected]