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Wednesday, August 24, 2022

Interested in Owning an Electric Vehicle?

 By Catherine Powell

Image courtesy Pixabay

While gas prices may have fallen a bit as of late, who can forget paying $5.00 a gallon or more at the pump?  I know I won't and this isn't something that most people will forget for quite some time.  As a result, many motorists have expressed an interest in owning an electric vehicle.  A few years ago, EVs were something of a rarity.  But today, every major car manufacturer has an e-car or two in their inventory.  While many consumers were put off by the high sticker prices of many EVs, not only have the prices dropped on some models, but the federal government offers up to $7,500 in tax credits on many EVs.  So, if you're looking to trade that gas guzzler for a vehicle that you can plug-in instead of paying through the nose at the pump, here's what you need to know.

Want to take up to $7,500 off your taxes? - Since 2010, the government has offered a federal tax credit of up to $7,500 for the purchase of a new electric or plug-in hybrid vehicle.  Sounds simple, right?  Well, it was anything but.  In the first place, the "up to" clause was based in part on the size of the battery the EV contained.  Secondly, the federal tax credit offered was also based on the size of your tax bill. If you wanted to collect the full $7,500 credit, you needed to owe the tax man at least $10,000 in income taxes.  If all you owed Uncle Sam was say $4,000, then that's the maximum credit you would qualify for.  Last but not least, not all cars manufactured in the US qualified for the tax credit.  That's because the federal government only provided the tax credit for the first 200,000 EVs produced by a manufacturer.  Once a manufacturer reached 200,001 EVs sold, the tax credits would gradually get reduced.  At least that was the way the law was initially written.

Then came the Inflation Reduction Act. - In early August 2022 President Biden signed into effect a law that rewrites the federal tax credit law for EVs.  The tax credit cap for automakers in the US has been eliminated for the foreseeable future.  This means that even manufacturers who have sold more than 200,000 electric vehicles can still offer up to a $7,500 tax credit to consumers.  That's the good news. The bad news is that qualifying for the tax credit is now a bit more complicated.  Below are some of the rules:

    1. To qualify, the EV must be assembled in North America, including the batteries.

    2. Half of the tax credit (or $3,750) is predicated on vehicles having at least 40% of the critical minerals used in their batteries either coming from the US or countries having a free-trade agreement with the US.  (Click on this link to see the list.)

    3. The other half of the credit requires that at least 50% of the battery components come either from the US or from a country that has a free-trade agreement with the US.

    4. The credit only applies to electric cars with a sticker price of $55,000 or less and electric SUVs, trucks, or vans with a sticker price of $80,000 or less.  

    5.  The tax credits only apply to US taxpayers making an adjusted gross income of $150,000 or less if filing individually, $225,000 if head of household, or $300,000 or less if filing jointly.

    6. A federal tax credit of up to $4,000 will be available to consumers who purchase used EVs that cost less than $25,000, provided the vehicle is purchased from a dealer and all the above mentioned terms are satisfied.

    7. The new law only applies to EVs delivered on or after January 1, 2023.

    8. Starting as early as 2024, the tax credit may be applied upfront at the dealership instead of waiting until tax time to redeem the credits.

    9.  This also means that some makes and models that currently don't qualify for the federal tax credit like Tesla Model 3 and Model Y, Chevy Bolt EV and EUV, and Cadillac Lyric twill do so after January 1. 2023.  (For a complete list of qualified vehicles and their associated maximum tax credit, click on this link.)

How does owning an EV affect my auto insurance? - Insuring an EV works much like insuring any other vehicle.  The same rates and discounts apply.  So too do all the other particulars used to determine rates, including the price of the vehicle, the options, your driving record, etc..

What are the pros and cons of owning an EV? - Just as with any new technology there are pluses and minuses involved in being an early adopter.  

PROS:

    1. Since there are fewer moving parts in EVs there's less routine maintenance required.  No oil changes or tuneups that are required of any internal combustion engine apply to fully electric vehicles.  

    2. EV owners experience no pain at the pump since all the juice you'll need to power your EV comes from your home's electricity which isn't as vulnerable to price fluctuations as is the cost of gasoline, provided that you stay within the battery's range limitations.  According to a June 2022 report by Car and Driver, this can range from 100 -520 miles per charge depending on the make and model of EV you purchase.

    3. EVs are far more eco-friendly than their gas-powered brethren.  Not only are electric vehicles more efficient when it comes to supplying power to the wheels (77% as opposed to 12% for gas vehicles), but EVs also produce far less air and noise pollution.

CONS:

    1. Battery replacement on EVs can run $5,000 or more.  That's the bad news.  The good news is that federal regulations mandate that makers of EVs provide a minimum battery warranty of at least 8 years or 100,000 miles, whichever comes first.  

    2. Charging stations for some makes can be hard to come by in some parts of the country.  To find compatible charging stations in your area or along any route you intend on taking, there are several apps that have been created to help limit range anxieties for EV owners.  PlugShare, ChargeHub, even the government-operated  Alternative Fuels Data Center, just to name a few can help you locate charging stations from coast to coast and Canada.

While it can take a bit of research before you decide what kind of EV you want to buy and for some makes and models a certain amount of waiting before you can take delivery, if want to thumb your nose at gas prices, there could be an EV in your future.

Catherine Powell is the owner of A Plus All Florida Insurance in Orange Park, Florida. To find out more about saving money on all your insurance needs, check out her website at http://aplusallfloridainsuranceinc.com



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