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The Inflation Reduction Act of 2022 is perhaps the most significant legislation to accelerate transportation electrification in U.S. history. The Electrification Coalition (EC) has been advocating for many of the key measures included in the law for over a decade. Altogether, this is a major win for consumers and businesses, but there are challenges on the road ahead.
For an overview of the Inflation Reduction Act, check out these EC resources:
The IRA extended the New Clean Vehicle Tax Credit for individuals and businesses. The tax credit allows up to $7,500 per vehicle through 2032; however, several modifications were added, including an MSRP cap, income cap, assembly/sourcing requirements, and options to transfer the credit to a dealer at the point of sale.
For a full breakdown of the changes to the New Clean Vehicle Tax Credit, view a factsheet created by the EC and SAFE.
For the first time, the IRA enacted a federal tax credit for used EVs. Eligible vehicles qualify for up to $4,000 or 30% of the sales price, whichever is lower. The sales price must be less than $25,000 and the vehicle must be at least two years old. Income caps also apply. View our factsheet for more information.
Commercial EVs can receive credit for up to 30% of the sales price, up to $7,500 for vehicles under 14,000 pounds and up to $40,000 for all other vehicles. Only certain vehicles are eligible for the credit, as the new law stipulates certain manufacturing and final assembly requirements.
The law allocates $1 billion to states, municipalities, Indian tribes, or non-profit school transportation associations to replace class 6 and 7 heavy-duty vehicles and school buses with clean EVs. View our top ten takeaways of this new opportunity.
The federal tax credit for charging equipment has been extended through 2032. For individual/residential uses, the tax credit remains unchanged at 30%, up to $1,000. For commercial uses, the tax credit is 6% with a maximum credit of $100,000 per unit (up from $30,000 per property).
The IRA established elective pay (sometimes referred to as direct pay): a program that allows tax-exempt entities like state governments, cities, and non-profits to benefit from the IRA’s tax credits. For more information about elective pay and for help applying, visit the EC’s elective pay page.
The law allocates $3 billion for electrifying the United States Postal Service fleet, including vehicles and charging infrastructure, advocated for by the EC.
Several other key measures in the law, including support for EV manufacturing and supply chains, include:
No. The tax credit as it previously existed had already ended for some of the most popular EV models and would soon end for models from a few other automakers. While some of the requirements in the new tax credit will lead to challenges in the coming years, extending the tax credit for another decade, through 2032, will ensure the long-term growth of the EV market in the U.S. Additionally, the incentives included in the law for manufacturing and supply chains will help automakers meet the new requirements.
Visit www.fueleconomy.gov for the most up-to-date information on which vehicles are eligible for the tax credits.
The text does not say that the seller must be a franchised dealer, it only says that the seller must be licensed to sell vehicles in a state, (though not necessarily the state where the sale takes place). The taxpayer should be able to transfer the credit to the automaker selling the vehicle, even if it is not a franchised dealer, though the IRS guidance on this section will provide further clarity. Alternatively, the taxpayer can simply take the credit on their taxes and not transfer the credit.
This information is provided as guidance, based on our interpretation of the Inflation Reduction Act, but we recommend that you consult your tax advisor for specific questions regarding your situation.
We invite you to check out these additional resources:
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Amy Malaki is the head of policy and sustainability at SkyNRG and SkyNRG Americas, pioneering global leaders in sustainable aviation fuel production and supply. Prior to SkyNRG, Amy was the associate director for the transportation portfolio at the ClimateWorks Foundation where she developed philanthropic investment strategies to advance a sustainable, equitable and low-carbon mobility system. She also pioneered the organization’s international aviation decarbonization strategy. Prior to that she focused on Asia business development at Better Place, a Silicon Valley electric vehicle network startup. She has a B.A. in Chinese and China studies from the University of Washington and an M.A. in international policy studies (energy and environment) from Stanford University.