Biden’s Inflation Reduction Act and New Electric Car Tax Credits: Here’s What You Need to Know
Inflation hit 9% this past June, a 40-year record high! Even though it’s gone down slowly since then, how do we cope with the soaring cost of living? To ease the strain on middle and working-class households, President Joe Biden signed the Inflation Reduction Act (IRA) into law on August 16, 2022.
In addition to tackling rising prices, this bill will lead to massive changes in the country’s infrastructure, healthcare system, and clean manufacturing industry. But how exactly will it accomplish these goals? Keep reading to learn how you can benefit from the U.S. government’s new initiatives.
What Exactly Is The Inflation Reduction Act?
The Inflation Reduction Act is a green initiative to benefit everyday Americans and their families. According to CNBC, the new law includes a $369 billion investment in climate and energy policies, $64 billion to extend a policy under the Affordable Care Act to reduce health insurance costs, and a 15% corporate minimum tax aimed at companies that earn more than $1 billion a year .The bill even plans to lower energy costs by up to $1,000 annually. These changes are also supposed to reduce the deficit by billions of dollars and finally bring inflation down to normal levels.
The new law is also essential in paving the way for a cleaner and greener economy with further investments in renewable energy. Roughly $369 billion is going directly towards tackling climate change by creating green manufacturing jobs, building new electric vehicle (EV) charging stations and solar factories, and even generous EV tax credits for new car buyers. This legislation could lead to a whopping 40% reduction in carbon emissions and will cut costs for consumers.
The Inflation Reduction Act’s EV Tax Credits Explained
If you’re buying a new car this year, you should consider investing in an electric one to take advantage of the IRA’s new initiative. Today, electric vehicles are still more expensive than standard cars.
But to motivate you to reduce your carbon footprint, the IRA is offering a generous tax credit of up to $7,500 for specific new EVs through the end of 2022.
Before you apply, there are a few essential requirements you and your vehicle need to meet before you can qualify:
- The car’s final assembly needs to be in North America and needs a gross weight rating of up to 14,000 pounds.
- The car can have a maximum price tag of $80,000 for SUVs, trucks, and caravans, and $55,000 for other accepted vehicles.
- You can’t exceed the maximum income limit of $150,000 for individuals and $300,000 if filing jointly.
These credits will be reduced to $3,750 by next year, and the requirements will get stricter. So take advantage and buy your new electric car as soon as possible to maximize this generous tax credit!
Is This Tax Credit Different From The One Offered Before The IRA?
The tax credit amount is still the same, but there are some key differences between the two. For starters, the old program didn’t have specific rules on income, the sourcing of battery components, or the type of EV you could buy. On the other hand, the new one has a “final assembly” clause to help prioritize local green car manufacturers. This new provision limits the amount of qualified EVs to encourage U.S. automakers to bring more auto manufacturing jobs back to the States.
The Bottom Line
The Inflation Reduction Act (IRA) comes with enormous benefits for everyday Americans. From more job opportunities to affordable healthcare costs, the law marks the start of a significant change in the U.S. economy. Besides enjoying cheaper energy prices, one of the best investments you can make is buying yourself an electric car. Not only will you save some money in taxes, but you’ll also be doing your part for the planet by reducing your carbon footprint!
Read More: Concerned About Inflation? Here Are 5 Ways To Get Ahead
