Updated June 2022: After the failure of the Build Back Better bill in late 2021, the existing proposals for the expansion of the EV tax credit were abandoned. The EV tax credit remains at $7,500 for all electric models except those made by Tesla and General Motors.
Senator Joe Manchin told reporters that the additional union-built EV tax credit has been removed from ongoing discussions over the future of the federal electric vehicle tax credit. It looks like there will be no $12,500 tax credit after all. What’s yet to be determined is whether or not the 200,000 sale cap may be removed, and if the credit may become refundable.
In June, the CEOs of GM, Ford, Stellantis and Toyota jointly urged Congress to lift the cap on the $7,500 electric vehicle tax credit. The rare unified front cited the higher costs to produce EVs as raw materials become tangled in global geopolitics.
“We ask that the per-(automaker) cap be removed, with a sunset date set for a time when the EV market is more mature,” the automakers said.
“Recent economic pressures and supply chain constraints are increasing the cost of manufacturing electrified vehicles which, in turn, puts pressure on the price to consumers.”
The EV tax credits that are being proposed for 2022 are larger and more robust than previous (and current) electric vehicle tax credits. The incentives had been proposed to go as high as $12,500 on new cars and up to $4,000 on used electric vehicles. And, potentially even more importantly, these tax credits will be refundable!
Current EV tax credits are nonrefundable, meaning the best you can get from the current EV tax credit is cancelling out other federal income taxes you owe, with no refund beyond that. The proposed electric vehicle tax credits for 2022 are refundable, meaning you could potentially get money back from the government for simply buying an EV. Wow.
Let’s break down the proposed 2022 EV tax credits. Don’t forget to check out the best state-level EV incentives too.
The federal EV tax credit may go up to $12,500
EV tax credit for new electric vehicles
Current EV tax credits top out at $7,500. The Build Back Better Act, which would have increased the maximum electric vehicle tax credit to $12,500, was defeated in Congress. The BBB EV tax credit provisions may still influence current efforts to update the incentive, so here are the provisions that were being built into the bill before it was defeated:
- $7,500 – Purchase an electric or plug-in hybrid vehicle, defined as a car with a battery capacity of at least 40 kilowatt-hours and a gas tank, if any, under 2.5 gallons
- $4,500 – If the car was assembled at a unionized U.S. plant. (Currently only GM, Ford and Stellantis qualify.)
- $500 – If the battery pack was made in the United States
Notably, the bill has language that says in 2027, only cars assembled in the U.S. and that have a battery of at least 50 kWH would qualify for the base $7,500 credit.
It’s also critically important to understand how the proposed credit can be applied. Car dealers can claim the credit on a consumers’ behalf. What the heck does that mean? It means dealers can build the tax break into the advertised prices of their cars. Instead of receiving a “credit” back from the government, in that case you’d simply receive a discount on the out the door price of your vehicle. And unlike current EV tax credits, the proposed electric vehicle tax credits for 2022 are refundable. This means that taxpayers can qualify for it even if they have no tax liability.
Current law for the federal tax credits phases them out after a manufacturer sells over 200,000 qualifying vehicles. The proposed language in EV tax credit updates would reset this for Tesla and GM (who have currently passed this threshold), so they would be eligible again.
EV tax credit for used electric vehicles and motorcycles
New EVs are the only ones getting in on the fun, used electric vehicles and two-wheelers are also eligible for federal tax credits in the proposed 2022 plan. This is the first time a credit has been available on a used car.
The current language in the Build Back Better Act has up to $4,000 for buying a used electric or plug-in hybrid vehicle. Interestingly, either the buyer or the seller can apply for the credit.
Electric motorcycles and three-wheeled vehicles are also eligible for up to $7,500 or half the vehicle’s price.
Proposed vehicle price and income limits
Note: The below income and price limits were proposed as part of the failed BBB legislation, and may or may not carry over to standalone legislation in 2022.
The proposed eligibility requirements for the EV tax credit are simple:
- Non-cars (vans, trucks, SUVs) need to be under $80,000 to be eligible for the credit
- Cars need to be under $55,000
There’s also an income limit for taxpayers to receive the credit:
- $500,000 for married couples
- $250,000 for single people
What vehicles qualify for the Build Back Better EV tax credit?
It’s important to understand that the current Build Back Better Act has not passed Congress, and until it does, many points will likely change. That being said, at the time of writing this there is only one current vehicle that would be eligible for the full $12,500 credit. That would be the Chevy Bolt. It is assembled in Michigan and has batteries from a nearby LG facility. Sadly, production of the Bolt is paused while GM fixes defective batteries in some Bolts, which occasionally caught on fire. (You can’t make this stuff up).
Here are the other vehicles that would qualify for the Build Back Better Act EV tax credits if it were to pass as written today:
|Make and Model||Full Tax Credit|
|e-tron Sportback (2020-2022)||$7,500|
|e-tron SUV (2019, 2021-2022)||$7,500|
|i3 Sedan (2014-2021)||$7,500|
|Focus EV (2012-2018)||$7,500|
|Mustang Mach-E (all 2021 trims)||$7,500|
|GENERAL MOTORS (GM)|
|Chrysler Pacifica Hybrid|
|Ioniq Electric (2017-2021)||$7,500|
|Kona Electric (2019-2022)||$7,500|
|Niro EV (2019-2021)||$7,500|
|Soul Electric (2015-2020)||$7,500|
|B-Class EV (2014-2017)||$7,500|
|Cooper S E Hardtop 2 & 4 Door (2020-2022)||$7,500|
|i-MiEV (2012, 2014, 2016, 2017)||$7,500|
|Polestar 2 (2021)||$7,500|
|Polestar 2 Long Range – Single & Dual Motor (2022)||$7,500|
|EQ fortwo Coupe (2019)||$7,500|
|EQ fortwo Cabrio (2019)||$7,500|
|RAV4 EV (2012-2014)||$7,500|
|ID.4 EV (First/Pro/Pro S) (2021)||$7,500|
|XC40 Recharge Pure Electric (2021-2022)||$7,500|
This page will update as we learn more about proposed updates to EV tax credits in 2022.