The up-to-$7,500 tax credit for the purchase of an electric vehicle (EV) will become unavailable upon the impending enactment of the “Inflation Reduction Act.”

This credit, available under Section 30 of the U.S. tax code, has been available until a manufacture sold its 200,000^th vehicle in the U.S., at which point it begins to phase out. The new law will put serious limits on the credit by imposing (1) a household income cap of $300,000 for couples filing jointly and $150,000 for singles; (2) a price cap of $55,000 for cars and $80,000 for trucks, and (3) geographic requirements on the sourcing of battery components and the assembly of the vehicles.

Those credits you were planning on receiving because your manufacturer was under the 200,000 vehicle limit are disappearing as soon as the final legislation goes into effect.  The House may pass it “as is” and the President may sign it within the next few days.

The Senate version of the bill has a “transition rule” which says that if you PURCHASED OR ENTERED INTO A WRITTEN BINDING CONTRACT TO PURCHASE an EV between January 1, 2021 and the day before the enactment of the new law, even if that EV is placed in service AFTER the enactment of the new law, then you can elect to treat the EV as having been placed in service on the day before the new law’s enactment.

The EV manufacturers that can still offer the credit are now panicking, worried that this will cause them to lose sales.  They are reaching out to customers who have made non-binding deposits and asking them to sign an actual binding purchase contract.  The deposit will become non-refundable, but the customer will lock in the credit under the “transition rule.”  If you are in this position and are intent on purchasing the EV or 50-50 on going forward with the purchase, then you should sign the binding purchase contract.  The worst that happens is you lose your modest deposit.

If you are in any way thinking of buying an EV because you might get the $7,500 tax credit, then visit the dealer or go to their website and place your order ASAP.  If you purchase the vehicle off the lot or enter into a binding contract to purchase a vehicle that will be delivered later, perhaps much later in 2023 or beyond, then you should get the credit under the “transition rule.”  If you end up changing your mind, again, the worst that happens is you lose the deposit that is holding your spot in line.