As lawmakers search for ways that they can help save the planet that we inhabit, there has been a big focus on electric vehicles and the different ways that driving them can help save the planet. Because there has been an emphasis on the benefits of driving these vehicles, there are some tax incentives that have been made available to early adopters. While these vehicles have gotten quite a lot of attention recently, there are still less than 10% of drivers choosing them when buying a new car. The government is hoping that these tax incentives can help spur more interest. Mark Dicus & Company is here to break down the tax incentives that come with purchasing a new EV so that you can decide whether or not it is a good fit for you.
Some Electric Cars are Not Eligible for Tax Credit
When it comes to the tax incentives for purchasing a new EV, not all vehicles will qualify for it. There is a critical mineral component as well as a battery component that play a role in determining whether or not a vehicle will qualify. There is a full tax credit of $7,500 on vehicles that qualify for both the critical mineral component as well as the battery component. If yours only qualifies for one or the other, you will get $3,750 rather than the full $7,500. Here is a breakdown of what it all means:
– Critical Mineral Component: For your vehicle to qualify for this portion of the credits, it has to have a certain percentage of the critical minerals used in the battery to be mined in the U.S. or by a U.S. free-trade agreement partner. Each year, the percentage goes up 10%. In 2023, the percentage was 40%. In 2024, that number goes up to 50%, and so on.
– Battery Component: The battery component is similar to the critical mineral component in that battery components have to be manufactured in the U.S. It doesn’t necessarily mean the entire battery, but a percentage does. In 2023, 50% of the battery components had to be manufactured or assembled in the U.S., but that number goes up 10% each year after that.
Price of EVVehicle
Not only does the manufacturing the vehicle play a role in whether or not your vehicle qualifies for the tax credit, but the price of the vehicle will determine that as well. For larger vehicles like SUVs, vans or trucks, the price of the vehicle has to be at or below $80,000. For other vehicles, it is $55,000.
Household Income of EV Purchaser
The household income of the vehicle purchaser is also considered. If you are married and filing jointly, your income cannot exceed $300,000 a year. For heads of household it is $225,000 and all other filers will be $150,000.
Tax Preparation, Filing, Planning & More in Salt Lake City, St. George, West Valley City, Provo, Orem, West Jordan & Greater Cedar City, Utah
If you have any other questions about your taxes or how to prepare and file them, you can turn to Mark Dicus & Company for the answers. Call us today!