Ready to buy an electric vehicle? What to know about the new tax breaks

At the Monterey Car Show, several luxury car manuacturers announced they're moving to all hybrid or electric lineups. The recently enacted Inflation Reduction Act covers a lot of ground, from reducing some drug prices to imposing a minimum corporate income tax. As much as anything, the legislation provides incentives for green energy. That includes substantial new tax breaks for consumers seeking to buy an electric car or truck.

The new tax-credit rules are set to last through 2032. The effective start dates aren't so easily summarized, hinging on several factors including vehicle components. As for pricing, credits will be available on cars and trucks carrying MSRPs up to $80,000 for vans, SUVs and pickup trucks, or up to $55,000 for all other vehicles. In other words, the credits are focused on relatively modest-priced cars and trucks as opposed to, say, the $249,900 Sapphire"super sports sedan" coming from Lucid Motors, which builds its electric cars at a gleaming new factory in Casa Grande, Arizona.

"The new credit requires final assembly of the vehicle in North America and also phases in sourcing requirements for critical components of the vehicles and battery systems," according to a Wolters Kluwer summary. “Tesla, Toyota and had already passed the 200,000 sales cap, and Ford was well on its way, meaning that consumers were unable to purchase the vast majority of market-available electric vehicles and still receive the consumer credit,” wrote ZETA's policy team in the group's report.

Considering that roughly two in three car buyers generally are shopping for used vehicles, this tax break will help expand the market.

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