Key Differences Between New and Used EV Federal Tax Credits
1. Maximum Credit Amount
- New EVs: Eligible buyers can receive a tax credit up to $7,500 for qualified new plug-in electric vehicles or fuel cell electric vehicles purchased in 2023 or after.
- Used EVs: The tax credit for used EVs is significantly lower, up to $4,000.
2. Credit Calculation
- New EVs: The $7,500 credit is split into two parts:
- Up to $3,750 if the vehicle’s battery is assembled or manufactured in North America, with increasing percentage requirements from 50% in 2023 to 100% by 2029.
- Up to $3,750 if the vehicle meets critical minerals sourcing requirements, i.e., a proportion of battery minerals extracted or processed in the U.S. or free-trade agreement countries, increasing from 40% in 2023 to 80% by 2027 and onward.
Vehicles meeting both conditions may qualify for the full $7,500 credit; meeting only one can result in a partial credit of $3,750.
- Used EVs: The credit equals 30% of the sale price of the used vehicle with a maximum limit of $4,000. To qualify, the vehicle must be purchased from a dealer, have a sale price of $25,000 or less, and be at least two model years old relative to the current year.
3. Eligibility Criteria
- New EVs: Must be a new qualified plug-in or fuel cell electric vehicle purchased in or after 2023.
- Used EVs: Must be a pre-owned electric or fuel cell vehicle purchased on or after January 1, 2023, with the additional conditions around dealer purchase, price cap, and model year. Pre-owned EVs bought before 2023 do not qualify for this credit.
4. Credit Refundability
Both credits are nonrefundable, meaning you cannot receive more than the amount of tax owed, and excess credit cannot be carried forward to future years.
In summary, new EV buyers may get a larger federal tax credit (up to $7,500) that depends on complex battery assembly and mineral sourcing requirements, while used EV buyers can claim a smaller credit (up to $4,000) based on 30% of the vehicle’s sale price with specific purchase conditions. Both credits aim to incentivize EV adoption but target different market segments with distinct qualification criteria.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-the-federal-tax-credits-for-new-and-used-evs-differ/
