The New $7,500 Tax Credit That Isn't

What you need to know

A highly-touted tax credit in the recently-passed Inflation Reduction Act is meant to incentivize Americans to purchase electric vehicles or other clean burning fuel vehicles. The bottom line, however, is that practically speaking YOU CAN’T GET IT.

Why few credits will be seen
As the new legislation is currently written, nearly all the electric vehicles sold today do not qualify for the new credit that begins in 2023. This is because:

• The vehicle must be manufactured in North America AND
• Powered by batteries with materials sourced in either the U.S. or from free trade partners AND
• If by some stroke of luck you find a new vehicle that qualifies, the price must be below $55,000 for a sedan and $80,000 for a van, truck or SUV.

Tax code as behavior modification
The new electric vehicle tax credit is a classic example of the continued shift from using income taxes to pay for federal spending to using the tax code to get us to do what the government wants. In this case:

• The government is trying to get manufactures to shift sourcing away from countries like China.
• The government wants to motivate the creation of manufacturing jobs in the U.S.
• The government wants to incentivize the manufacturing of lower-priced electric vehicles and alternative clean energy vehicles.

What this means for you
What this means for the average consumer is little to anything…right now. If you have your sights set on getting an electric vehicle, make the decision without the influence of the credit. If maximizing the credit is important for you, you now need to pay attention to income limits and will need to wait for some time to see if the credit influences manufacturers to change their sourcing and assembly plans.

"Tax Tips" are published to provide current tax information, tax-cutting suggestions, and tax reminders. If you would like more information on anything in "Tax Tips," or if you'd like to be on our mailing list to receive other tax information from time to time, please contact our office.
 
The tax information contained in this site is of a general nature and should not be acted upon in your specific situation without further details and/or professional assistance.
 
We are trusted CPA advisors servicing Burr Ridge, Hinsdale, Willowbrook, Darien, Naperville, and all Chicagoland area. 

Do you need assistance with your business and/or personal tax returns? Would you like to have a trusted source for your accounting, allowing you additional time to focus on increasing your business? Do you use QuickBooks, or plan to in the future, for your accounting? We include these in all our service packages, customized to fit your personal or business needs.  
 
We are currently accepting new clients. Your initial consultation is free, so you have nothing to lose and everything to gain. Our experienced staff is available to help you streamline your accounting, giving you more free time for yourself. Set up an appointment today by calling (630) 320-3720 or email us at [email protected]. 
 
For more free resources, such as Tax Organizers, and Record Retention Schedules, access our website www.monarchaccountinggroup.com.

Mia Verc, CPA;  Janice Papais, CPA