If you’re thinking of buying an electric vehicle (EV) in the near future, you may be wondering how the 2023 Inflation Reduction Act EV tax credit will change for 2024. The EV tax credit is a federal incentive that can reduce your tax bill by up to $7,500 when you purchase a new or used qualifying EV. However, the rules and requirements for claiming the credit are not the same for every year.

In this post, we’ll explain how the 2023 Inflation Reduction Act EV tax credit works, what changes are coming in 2024, and how to plan ahead to maximize your savings.

How the 2023 Inflation Reduction Act EV Tax Credit Works

The 2023 Inflation Reduction Act EV tax credit is a nonrefundable credit that you can claim on your federal income tax return if you buy a new or used qualifying EV in 2023. The amount of the credit depends on several factors, such as:

• The type of vehicle (plug-in hybrid, battery electric, or fuel cell)
• The battery capacity of the vehicle
• The manufacturer’s suggested retail price (MSRP) of the vehicle
• The date of purchase and delivery of the vehicle
• Your modified adjusted gross income (MAGI)
• Whether the vehicle meets certain critical mineral and battery component requirements

The maximum credit amount for new EVs is $7,500, which is split into two parts: $3,750 for meeting the critical mineral requirement and $3,750 for meeting the battery component requirement. To meet these requirements, the vehicle must have at least 50% of its critical minerals and battery components sourced from North America. If the vehicle meets only one of these requirements, the maximum credit is $3,750. If the vehicle meets none of these requirements, it is not eligible for the credit.

The maximum credit amount for used EVs is $4,000, which is also split into two parts: $2,000 for meeting the critical mineral requirement and $2,000 for meeting the battery component requirement. To qualify as a used EV, the vehicle must have been previously owned by someone other than you or a related party, and have been driven less than 75,000 miles. The same sourcing rules apply as for new EVs.

The actual credit amount you can claim may be lower than the maximum amount, depending on your MAGI and the MSRP of the vehicle. The credit phases out for taxpayers whose MAGI exceeds certain thresholds:

• $300,000 for married couples filing jointly
• $225,000 for heads of households
• $150,000 for all other filers

You can use your MAGI from either the year of purchase or the preceding year, whichever is lower. If your MAGI is below the threshold in either year, you can claim the full credit amount.

The credit also phases out for vehicles whose MSRP exceeds certain limits:

• $80,000 for vans, SUVs, and pickup trucks
• $55,000 for all other vehicles

If the MSRP exceeds the limit for that specific vehicle type, that vehicle is not eligible for the credit.

To claim the credit, you must buy the vehicle for your own use and not for resale. You must also use it primarily in the U.S. You can claim only one credit per vehicle and up to two credits per year. You cannot carry over any unused credit to future years.

What Changes Are Coming in 2024

The 2023 Inflation Reduction Act EV tax credit will change in several ways in 2024. Here are some of them:

• The critical mineral and battery component requirements will become stricter. The vehicle must have at least 55% of its critical minerals and battery components sourced from North America in 2024, and at least 60% in 2025 and beyond.
• The sourcing rules will also apply to labor costs. The vehicle must have at least 45% of its labor costs attributable to workers in North America in 2024, and at least 50% in 2025 and beyond.
• The MSRP limits will be adjusted for inflation. The limits will be increased by a percentage equal to the consumer price index (CPI) for all urban consumers from August 2022 to August of each subsequent year.
• The MAGI thresholds will be adjusted for inflation. The thresholds will be increased by a percentage equal to the CPI for all urban consumers from August 2022 to August of each subsequent year.
• You will have an option to transfer the credit to a dealer. Instead of waiting until you file your tax return to claim the credit, you can choose to assign it to an eligible dealer at the point of sale. The dealer will then reduce the purchase price of the vehicle by the amount of the credit and claim it on their own tax return. This option will be available only for new EVs, not for used EVs.

How to Plan Ahead to Maximize Your Savings

If you’re planning to buy an EV in the near future, you may want to consider the following tips to maximize your savings from the 2023 Inflation Reduction Act EV tax credit:

• Compare different models and brands of EVs. Not all EVs are eligible for the credit, and not all eligible EVs qualify for the same credit amount. You may want to compare different models and brands of EVs based on their features, prices, battery capacities, sourcing percentages, and credit amounts. You can use online tools like FuelEconomy.gov or Edmunds.com to find and compare eligible EVs.
• Check your MAGI and plan your income. Your MAGI may affect your eligibility and amount of the credit. You may want to check your MAGI from the previous year and estimate your MAGI for the current year. If your MAGI is close to or above the threshold, you may want to plan your income accordingly. For example, you may want to defer some income to a later year or increase some deductions to lower your MAGI.
• Time your purchase and delivery. The date of purchase and delivery of the vehicle may affect your eligibility and amount of the credit. You may want to time your purchase and delivery to take advantage of the best credit amount and sourcing rules. For example, you may want to buy and take delivery of a new EV before April 18, 2023, to avoid the critical mineral and battery component requirements. Or you may want to buy and take delivery of a new EV in 2024 or later, to take advantage of the option to transfer the credit to a dealer.
• Keep records and receipts. To claim the credit, you will need to provide proof of purchase and ownership of the vehicle, as well as information about its features, price, battery capacity, sourcing percentages, and labor costs. You may want to keep records and receipts of these items, such as the sales contract, invoice, window sticker, certificate of origin, manufacturer’s statement, or other documents. You will also need to fill out Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit, and attach it to your tax return.

Conclusion

The 2023 Inflation Reduction Act EV tax credit is a valuable incentive that can help you save money and reduce your environmental impact when you buy an EV. However, the rules and requirements for claiming the credit are not static and will change over time. By understanding how the credit works and what changes are coming in 2024, you can plan ahead and maximize your savings.

We hope you found this post helpful and informative. If you have any questions or comments, please feel free to leave them below.

And if you’re looking for more tips on how to optimize your EV lifestyle, check out our other blog posts on The Greener Electron. We cover topics like how to charge your EV faster, how to save money on your electricity bill, how to reduce your carbon footprint, and more.

Thanks for reading!

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The electrical grid is the network of power stations, substations, transmission lines, and distribution lines that deliver electricity to homes and businesses. The greater Seattle region is part of the Northwest Power Pool (NWPP), which covers 14 states and two Canadian provinces. The NWPP is interconnected with other regional grids in the Western Interconnection, which spans from Canada to Mexico.

The NWPP has a diverse mix of energy sources, including hydropower, natural gas, coal, nuclear, wind, solar, biomass, and geothermal. Hydropower is the dominant source of electricity in the NWPP, accounting for about 60% of the total generation. Natural gas is the second-largest source, followed by coal and wind¹.

The greater Seattle region is served by several electric utilities, including Seattle City Light (SCL), Puget Sound Energy (PSE), Snohomish County Public Utility District (PUD), and Tacoma Power. SCL is the largest public utility in Washington and the 10th largest in the U.S., serving more than 460,000 customers in Seattle and surrounding areas. SCL generates more than 90% of its electricity from renewable sources, mainly hydropower².

Home solar power is the use of solar panels to generate electricity from sunlight for your home. Solar panels are typically installed on your roof or backyard and connected to an inverter that converts the direct current (DC) output into alternating current (AC) that can be used by your appliances or fed back to the grid.

Home solar power has many benefits for homeowners in the greater Seattle region, such as:

• Generating clean, renewable energy for your home
• Reducing the amount of electricity you use and buy from your utility, lowering your electricity bills
• Taking advantage of federal and state financial incentives that may be available
• Increasing the value of your home
• Locking in the price per kW you will pay in the future, even if the electrical provider raises rates

But how much does home solar power cost in the greater Seattle region? And when is the optimal time to install solar panels for your home?

According to EnergySage, a leading online marketplace for solar quotes and information, the average cost of installing a 5 kW solar system in Seattle ranges from $13,345 to $18,055 before incentives as of July 2023. The average cost per watt is $3.14³. However, these costs can vary depending on several factors, such as:

• Your household’s energy needs
• Your available unshaded roof space
• The quality and efficiency of your solar panels
• The type and size of your solar system
• The choice of your solar installer
• The local permitting fees

To get a more accurate estimate of your home solar cost, you can use online tools like Solar-Estimate.org or request free quotes from multiple solar installers on EnergySage.

The optimal time to install solar panels for your home depends on several factors as well, such as:

• The seasonality of sunlight in your area
• The availability and expiration of incentives
• The demand and supply of solar equipment and labor
• Your personal preferences and goals

Generally speaking, spring and summer are the best seasons to install solar panels in the greater Seattle region because they have longer days and more sunlight hours than fall and winter. However, this also means that there may be higher demand and longer wait times for solar installation during these seasons.

One of the factors that you should consider before installing solar panels for your home is the availability and expiration of incentives. The Inflation Reduction Act of 2022 (IRA) is a major legislation that provides a 30% tax credit for qualifying investments in solar and other renewable energy projects. If you install solar energy equipment in your residence any time this year through the end of 2032, you are entitled to a nonrefundable credit off your federal income taxes, equal to 30 percent of eligible expenses. The IRA also removes requirements for energy storage projects to receive the same 30% tax credit, even if they are stand-alone facilities. This means that you can save more money and enhance your solar system with batteries. However, this incentive will start to phase out after 2032. Therefore, if you want to take advantage of the full 30% credit, you should install your solar system as soon as possible.

Additionally, you should also check if there are any state or local incentives for home solar power in your area. For example, Washington State offers a sales tax exemption for residential solar systems until June 30th, 2029⁵. You can find more information about available incentives on DSIRE or EnergySage.

Finally, you should also consider your personal preferences and goals when deciding when to install solar panels for your home. For example, if you want to reduce your carbon footprint as soon as possible or lock in a low electricity rate for years to come, you may want to install your solar system sooner rather than later. On the other hand, if you want to wait for technological improvements or price reductions in solar equipment or installation, you may want to install your solar system later.

In conclusion, the electrical grid and home solar power in the greater Seattle region are both important topics for homeowners who want to save money and the environment. Home solar power can offer many benefits for homeowners in the area, but it also requires careful planning and research. If you are interested in installing solar panels for your home, you should compare multiple quotes from reputable solar installers and find the best option for your needs and budget. You can also contact us at The Greener Electron for more information and advice on home solar power. Thank you for reading our blog!

¹: Map of power generation in the Northwest – Northwest Power and Conservation Council. ²: About Seattle City Light – Seattle City Light. ³: Solar Panel Cost in Seattle, WA – EnergySage. ⁴: Federal Investment Tax Credit for Solar Energy – Solar Energy Industries Association. ⁵: Renewable Energy System Cost Recovery Program – Washington State Department of Commerce.

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