Climate Protection: Last chance for the $7,500 EV discount

These last couple of weeks, there were flash floods in new places in Texas, more wildfires in California and Europe, and worse heatwaves in Europe, China, and the Eastern U.S.

Last week, Pope Leo XIV wrote,

“In a world where the most vulnerable of our brothers and sisters are the first to suffer the devastating effects of climate change, deforestation and pollution, care for creation becomes an expression of our faith and humanity.”

And Congress passed a new tax and spending bill that removed all progress made on spending to mitigate climate disaster.

Maybe the worst part of the tax and spending bill is cutting health care and food stamps for children. The bill also cuts support for building up our renewable energy capacity, which will slow down climate protection.

An upside of the bill is that it pushes Americans to hurry up buying electric vehicles. That’s good for stopping burning gasoline, and stopping gasoline is a big part of how we stop global warming.

The 2022 Inflation Reduction Act provided up to $7,500 in savings when you buy an EV. The reconciliation bill moves the deadline for that money to the end of September. If you haven’t already replaced your gasoline car with an EV, now’s the time. By October, that money will be gone.

Point of Sale

The incentive the federal government provides for your EV is a tax credit, but you don’t have to wait until you file your taxes to take advantage of it.  The dealer you buy your electric car or truck from will take the amount off what you pay when you buy the vehicle.

To get the money, you have to buy from a dealer. Do not count on the dealer bringing it up. A friend of mine just bought a used EV. He tells me he had to remind the dealer about the incentive, but then everything was easy, saving him thousands of dollars.

Income

The tax credit is not available for people with high incomes who buy a car.

New EVs

For the $7,500 credit for new EVs, if you are single filer without dependents, you have to have an adjusted gross income below $150,000 this year or last year. For a head of household (a single filer with dependents), the cutoff is $225,000. For married couples filing jointly, widows or widowers, the cutoff is $300,000.

If your income is over the limit, you can take advantage of the incentive by leasing your vehicle, rather than buying.  There is no income limit for getting the $7,500 when you lease.

If you earn too much after you get the savings, you’ll end up paying the money back in your 2025 income tax returns.  If your income might go over the limit, you probably want to lease.

Used EVs

The incentive for used electric cars and trucks is 30% of the price of the vehicle up to a maximum of $4,000.

The income limits for used cars and trucks are lower than for new EVs: $150,000 for married filing jointly, widows, and widowers; $112,500 for heads of households (single filers with dependents), and $75,000 for everyone else.

If your income is over those cutoffs (both this year and last year), you can get the incentive on a lease, but used-car leasing programs are unusual.

Vehicle Requirements

Other than with leasing, the discount is not available for every vehicle. Some electric cars and trucks get only part of the incentives, and some cannot get any incentive at all. Leasing allows you to get the savings on any fully electric or plug-in hybrid vehicle.  (A plug-in hybrid is an EV with a gas engine. It can run on gas, and you can charge its battery by plugging in.)

The IRS maintains lists of qualifying vehicles and what their available incentives are.  The list for new cars is available at fueleconomy.com.  For an EV not on that list, you can probably get the incentive by leasing.

For new electric vans, SUVs, & pickup trucks, the manufacturer’s suggested retail price cannot be over $80,000.  For other new vehicles, the MSRP cannot be over $55,000.

The list for used cars and trucks is available on another webpage at fueleconomy.gov. For used vehicles, the price cannot be over $25,000.

Plug-in Hybrids Are Eligible

Last week, a friend of mine got the discount when he bought a Honda Clarity plug-in hybrid.  If he wanted, my friend could drive his Clarity around as if it were a gasoline car, buying gas and forgetting that his car is also an EV. A Clarity can go 325 miles on a full tank of gas. My friend plans to top up his battery at home every night from a 120-volt outlet. As long as he drives less than 47 miles each day, he’ll never buy gas again.

This gas/electric flexibility can be great for some people. Another friend of mine complained that there were no reasonably priced electric vehicles that could carry a driver and six kids. There is a plug-in hybrid for that. The Chrysler Pacifica minivan can go 30 miles on its battery, and I have seen used Pacifica minivans with less than 90,000 miles available for $20,000 ($16,000 if you buy before October).

Available for Low Income Families

The incentive is called a “tax credit,” and if you get the credit when your income is too high, you’ll have to pay it back with your taxes. If your taxes would be less than the “credit,” you still get the full savings and the IRS is not going to ask for anything back. For example, if a married couple filed jointly with a $30,000 income, they would owe no money in taxes whether or not they bought a car.  If they got the full $4,000 off the price of a used car, the IRS would leave them alone and let them keep the $4,000.

What’s next?

Current federal leadership supports increasing carbon dioxide levels and increasing global temperatures. I don’t believe the current leadership can be reasoned with. Rand Paul, Elon Musk, Thom Tillis and many others have all had no luck trying. At the same time, U.S. historian Heather Cox Richardson points out that efforts like cutting Medicaid and food stamps for children have sparked extreme swings in government. Until our federal government swings back, I’m focusing on supporting the boycott of gasoline and natural gas, and I’m focusing on our state and local governments. Our local laws include advantages for the fossil fuel industry, like insufficient requirements for gas station insurance, free natural gas hookup schemes, and roadblocks for heat pumps. Here in Washington state, reaching out to local representatives to address these problems will make a difference.