The Inflation Reduction Act, signed into law by President Joe Biden last Tuesday, saw one obligation for the $7,500 Federal Tax Credit come into immediate effect. For now, EVs and PHEVs must be assembled in North America in order to qualify for the tax credit. That's the only new rule until January 2023, which is when more obligations will come into place.
From January onwards, only cars worth less than $55,000 or trucks/SUVs worth less than $80,000 will qualify for the $7,500 tax credit. Furthermore, single people who earn more than $150,000 a year and couples who earn more than $300,000 a year will not be eligible for any form of EV tax credit. There will also be new rules about production materials, with 40% of metals having to come from North America or a free-trade partner.
It will be interesting to see what category crossovers fall into. For example, is a Tesla Model Y an SUV or a car? If the government decides it's an SUV, it will get the full $7,500 credit. However, if they say it's closer to a car it will get nothing.
One positive is the removal of the 200,000 unit production cap. Again, this will come into effect in January and means Tesla, GM and Toyota will qualify for the tax credit. There will also be a new $4,000 tax credit for used EVs worth less than $25,000 (however only low-income earners will be able to benefit from this).
So to summarize, between now and January only one thing matters: where the EV / PHEV is assembled (must be in the USA, Canada, or Mexico). From January 2023 onwards, it must be worth less than $55,000 to qualify if it's a sedan or $80,000 if it's a pickup truck/SUV. 40%+ of production materials must be sourced from North America or a free-trade partner. And finally, singles earning more than $150,000 a year or couples earning more than $300,000 a year combined will not be eligible for any tax credit.