March 1, 2024

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Tax credits for electric vehicles have changed again: here you can still get deductions

Tax credits for electric vehicles have changed again: here you can still get deductions



CNN

The Internal Revenue Service has updated the rules for electric vehicle tax breaks again starting on the first day of 2024, bringing some good and bad news.

The bad news is that fewer vehicles now qualify for federal tax credits, and even fewer qualify for the maximum credit of $7,500.

But there is good news too. Many plug-in hybrid and electric models still qualify for at least part of the full tax credit. Consumers can also now get the tax credit applied to the purchase price of the vehicle at the time of purchase, rather than having to wait to file their taxes. As before, if you lease the car instead of buying it, you can still enjoy the tax credit benefits even on vehicles that wouldn't otherwise qualify.

Many states and even municipalities also offer their own incentives for electric vehicles and for the installation of home EV chargers. These IRS changes do not affect those incentives.

Even with deep discounts on electric cars, as most are currently, tax breaks are in some cases the only way to get any kind of benefit. That's an electric vehicle incentive, said Ronald Montoya, consumer advice editor at Edmunds.com. Tesla, for example, does not negotiate the sticker price.

“If you look at Tesla, which is one of the most popular electric cars, it's not [give] “Any rebates, so the tax credit is very important to Tesla buyers,” he said. “So it just depends on the car. But I think overall they are a great incentive for people.

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The new rules relate to where car parts are manufactured, especially batteries and battery components. In particular, if these parts are manufactured in China, the tax credit will be reduced or even completely eliminated.

Many automakers are now building electric vehicle battery factories in the U.S., so even if a particular model doesn't qualify for the full tax credit today, it might in the coming months or years as automakers change their parts supply chains. With them.

are among the models that still qualify for the full $7,500 tax credit, according to EV IRS websitethe Ford F-150 Lightning pickup truck, the Chrysler Pacifica hybrid pickup truck, and various versions of the Tesla Model 3, Model Y, and Model X.

However, some electric and hybrid vehicles no longer qualified for tax credits last year, according to the IRS website. However, the list is subject to change as more automakers complete submissions and change their supply chains.

For example, the Nissan Leaf was eligible for a $3,750 tax credit late last year, but is not as of this week, according to the website. Likewise, Ford Mustang Mach-E owners who took delivery of their SUV last year can receive a $3,750 tax credit, but that model is not currently listed as eligible. new year. The Volkswagen ID.4 was eligible for the full $7,500 tax credit through the end of 2023. However, it is not currently listed as eligible for any Buy Now tax credit.

Volkswagen spokesman Mark Gillies said the German automaker is still in the process of submitting all the required papers. The company is “optimistic” that all 2023 and 2024 ID.4 models will eventually be eligible.

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Nissan said it is working with parts suppliers to meet the new requirements so that the LEAF can be eligible again in the future.

For some electric and hybrid vehicles, whether and how much they qualify for a tax credit depends on the specific individual vehicle and its specific parts content. For this reason Tax Authority website It has a place to enter the individual vehicle identification number, or VIN, for the vehicle the customer is purchasing or considering.

The application of these new tax credit rules, or last year's rules, depends on when the vehicle was “placed in service,” to use IRS terminology. This means that even if you sign the paperwork to buy a car in 2023 but won't take delivery of the car until this year, the new tax rules for 2024 will apply. So, you may not get the tax credit you would have gotten if the car was in a driveway. Your car before January 1st. On the other hand, if you take delivery of the car in 2023, the tax credit rules in effect at that time will still apply.

However, if you lease, you can benefit from the tax break even on vehicles that were never eligible. This is because if you rent, different – ​​and more lax – tax regulations apply. Instead of going to you, the tax credit goes to the leasing company. But, in many cases, it is passed on to customers as a “rent incentive,” resulting in lower monthly payments.

Montoya said leasing is an excellent idea, anyway, when considering an electric vehicle. Electric vehicle technology is still changing rapidly, so anyone who buys an electric car today might want to upgrade to a new car with longer range or faster charging in a few years, anyway, he said. Leasing also helps reduce monthly payments, which are currently too high for car purchases due to high interest rates.

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