Electric vehicle incentives are getting a total makeover

EVs could become more affordable, but there are some major asterisks

A Chevrolet Bolt EV gets charged at a charging station in Baker, Calif., April 18, 2019. The Biden administration's 2022 Inflation Reduction Act includes an extension of a tax credit for electric vehicles worth up to $7,500 per qualifying car or truck.Philip Cheung/NYT

INTO THE RED: Climate and the fight of our lives

Thinking of buying an electric car? Two huge new climate policies — the Inflation Reduction Act that President Biden signed last week, and a major bill that Governor Charlie Baker signed Aug. 11 — include subsidies intended to make them more affordable.

Once both policies kick in, you could be eligible for up to $12,500 in federal and state incentives combined, cutting the price on a qualifying car by a quarter or more.

But it’s not yet clear when the state’s new, higher EV incentives will kick in. And, for now at least, there are some major limitations on which cars actually qualify for the federal program; only 21 models are currently eligible, and that number could soon shrink, depending on how quickly automakers can adapt.

If you’re in the market for an EV, use this guide to figure out if you should move fast or pump the brakes.

How big are the incentives, and when can I get them?

The federal bill includes tax credits of up to $7,500 for new electric or fuel-cell vehicles, extending the previously existing tax incentives. Some plug-in hybrids qualify, too.

Starting Jan. 1, 2023, those rebates will be available only to individuals who make less than $150,000, or $300,000 for married couples.

The new Massachusetts bill will increase rebates for new fully electric cars and fuel-cell cars from $2,500 to between $3,500 and $5,000 — the exact amount is yet to be determined — with an additional $1,500 rebate for low-income residents and an extra $1,000 for those who trade in an internal combustion vehicle.

But the state bill doesn’t include a timeline for implementing any of these changes. And it’s not clear how the new program will be paid for: The new climate bill sets up an Electric Vehicle Adoption Trust, but doesn’t actually fund it. (The money could come from a separate economic development bill, but the Legislature failed to complete it before the session ended last month, so the timing and outcome remain uncertain.)

For now, the old program is still open and funded until the middle of 2023, according to Kyle Murray, Massachusetts senior policy advocate at the Acadia Center.

Which new EVs qualify for the new federal credits?

If you bought an EV before Biden signed the IRA on Tuesday and it previously qualified for a credit, you can still claim it on next year’s taxes.

But the moment Biden signed the bill, a new requirement kicked in: To qualify for federal credits, EVs must now be assembled in North America.

With that change, just 21 models of EVs in North America are eligible, the Biden administration said Tuesday.

The full list is on the Department of Energy’s website. (If you’ve already entered into a written contract to buy an EV that’s not listed, you should be all right.)

Two more stipulations — set to start being phased in sometime after Jan. 1, 2023 — will mean that qualifying cars must use a battery that is both built in North America and made with a certain percentage of minerals mined or recycled within the continent or a trade partner country. If a vehicle meets only one of those criteria, it can qualify for half of the credit, said Chris Harto, a senior policy analyst for transportation and energy at Consumer Reports.

These three stipulations are a clear attempt to push China out of the EV market and boost local supply chains. The problem is the supply chains that the bill requires are currently virtually nonexistent. The Alliance for Automotive Innovation, a key automaker trade group, says not a single model in the United States meets all these qualifications.

Brian Willis, communications director for the Zero Emission Transportation Association, said the Inflation Reduction Act also includes billions to help auto companies move their manufacturing and sourcing to the United States.

But Harto said it’s impossible to say how long it will take manufacturers to come into compliance. The Alliance for Automotive Innovation says it could be a few years.

So if you want an EV credit fast, consider quickly snapping up one of those 21 models if you can find one, because some may become ineligible next year.

On the bright side, on Jan. 1, 2023, the legislation will toss out a limit that prevented manufacturers from offering tax credits once they sell 200,000 vehicles. That means cars made by companies like General Motors, Tesla, and Toyota, which have already exceeded that cap, will become eligible again.

But also starting in 2023, federal credits will also come with price restrictions. New electric vans, SUVs, and pickup trucks can’t cost more than $80,000, and new sedans, hatchbacks, and wagons must cost $55,000 or less.

Keep in mind: The amount of federal tax credit you can receive also depends on how much you owe in taxes. If the car you buy is eligible for up to $7,500 in credits, you must owe that amount or more to receive the full incentive amount. The Massachusetts rebates are available regardless of how much a taxpayer owes.

Which new EVs qualify for state rebates?

Right now, only vehicles that cost under $50,000 qualify for Massachusetts rebates. But the new climate law will increase that cap to $55,000.

Thanks to the bill, the state will also, for the first time, provide rebates, worth at least $4,500, for medium- and heavy-duty electric vehicles.

Anna Vanderspek, electric vehicle program director at the Boston-based nonprofit Green Energy Consumers Alliance, expects the bill will eliminate state rebates for plug-in hybrids, which are currently worth $1,500.

Used EVs

Both federal and state incentives for used EVs are also on the way.

Beginning in 2024, federal incentives of up to $4,000 will be available for used EVs that cost up to $25,000. If you meet the income requirements, that is — a maximum of $150,000 for couples or $75,000 for an individual. Used EVs don’t have to meet the new federal manufacturing and material sourcing rules.

It’s not yet clear how much the state’s used EV rebates will be worth; lawmakers left it up to program administrators to decide.

Point of sale

Currently, federal and state incentives are available only after you file your taxes. That’s set to change.

Starting in 2024, federal incentives will be available when you buy your car at the dealership. The new state climate bill, too, will allow the state to offer point-of-sale rebates, though we don’t yet know exactly when.

So if upfront costs are a concern, consider waiting to buy.

What about chargers?

The federal law, starting next year, will provide subsidies for home chargers — up to $1,000, or 30 percent of the cost, whichever is less.

The new state law doesn’t include home charger subsidies. But it does require electric utilities to establish discounted charging rates during off-peak hours when demand is low, and it requires the state to install more high-power chargers at service areas along the Massachusetts Turnpike, as well as at subway and commuter rail stops and at least one ferry terminal. The bill sets up a trust to fund charging infrastructure, but again, doesn’t put money into it.

I’m confused!

To help people navigate state and federal incentives, Consumer Reports is updating its online Electric Vehicle Savings Finder. The goal is to have it fully updated before most of the new federal incentives kick in.