Concentration of CO2 in the Atmosphere

What the IRA Means for EVs


Union of Concerned Scientists

Among the climate-focused policies in the Inflation Reduction Act are significant changes to the electric vehicle (EV) tax credit for consumers. While the maximum credit of $7,500 for new EVs remains the same as before, many of the details have changed. Most importantly, the tax credit was formerly capped once a manufacturer reached 200,000 sales. This meant that consumers buying EVs from General Motors and Tesla could no longer take advantage of the credit. The new version of the tax credit removes this cap and instead sets the credit to expire after 2032 for all EVs regardless of manufacturer. Plus, starting in 2024, the credit will be transferable to dealers, meaning that buyers could benefit from a lower up-front cost instead of having to wait to claim a credit on their income tax return. And, for the first time, the new legislation adds a credit of up to $4,000 for some used EVs.

Some of the new provisions limit which vehicles and buyers are eligible for the tax credit. Changes to the credit include requirements for final assembly in North America and critical mineral and battery-component sourcing and manufacturing requirements. The new credit will also have a price cap that will make many luxury EVs ineligible, and an income cap that excludes high-income earners from the credit starting in 2023.

In the short term, the new restrictions mean fewer EV purchases will qualify for the federal tax credit, making it harder for some to buy an EV. However, as manufacturers increase their North American production capacity, the new credit will help many more drivers make the switch from gas to electric. This will be important as we accelerate the transition to EVs this decade, aiming to meet President Biden’s national goal of having zero-emissions vehicles make up half of all new car and truck sales by 2030.

Reprinted with permission from the fall 2022 Catalyst Magazine found at

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