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Navigating EV Tax Credits in 2023

This episode of Middle Tennessee Electric's Plugged In Podcast features a detailed discussion about electric vehicle (EV) tax credits with lead economist Teri Viswanath from Cobank. The conversation covers the qualifications and restrictions for claiming tax credits on new and used EVs, including maximum claim amounts, income restrictions, and the requirement for vehicles to be manufactured in North America. The hosts, Brandon Wagner and Amy Byers, explore changes to tax credits, such as the introduction of a point-of-sale rebate in 2024 and the distinction between two separate credits for raw materials and battery components. Additionally, they discuss tax credits for EV chargers and energy-efficient installations at home, and the impact of the leasing option for EVs. The episode also touches upon the current state of the EV market, inventory levels at dealerships, and the importance of reliable public charging infrastructure.

00:00 Introduction to the Podcast

00:31 Guest Introduction: Teri Viswanath

00:36 Discussion on Tax Credits for Electric Vehicles

01:50 Guidelines for Filing for 2023 EV Tax Credit

03:55 Personal Experience with EV Tax Credits

10:14 Changes in Tax Credits for 2024

12:38 Impact of New Tax Credits on Dealerships

18:27 Tax Credits for EV Charging Equipment

24:21 Future of Electric Vehicles and Tax Credits

28:06 Conclusion and Contact Information

Here's some more information you might find helpful to topics we referenced in this episode:

MTE's Electric Vehicle Programs & Educational Resources

• https://mte.com/DriveEV — Hub for all things electric vehicles at MTE

• https://mte.com/EVCarClub — MTE-sponsored car club for EV owners and enthusiasts interested in building a community in Middle Tennessee

• https://mte.com/EVReady — $50 incentive for MTE members or homebuilders installing level 2 chargers at their homes

Copyright 2024 Middle Tennessee Electric

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Amy & Brandon: I'm Brandon Wagner

and I'm Amy Byers and welcome to Middle Tennessee Electric's Plugged In Podcast. Today we are welcoming back Teri Viswanath with Cobank. She is here to talk about tax credits for electric vehicles.

You are the go to person. And I know we got a lot of really good feedback on our podcast we did last year. So, uh, we're going to do it again and probably keep this going. I think this is , um, this is a topic that changes every year. So it's good to kind of keep on top of that. So welcome to the podcast, Teri.

Terri: Hey, thank you. My, my pleasure for joining. And, um, this year I think hopefully we'll be on. So folks that are going to go back and maybe look at last year's podcast. Uh, what I didn't know is that we actually, you know, we have a video so you can see us communicate and talk, which is great. And I should have known that part, but last year I had my, my kids baseball cap on, you know, so, so do not unearth that podcast where we're going to say all new things this time.

So just stay with

us on this version.

Well, I mean, this is the first time I've been excited about filing my taxes.

I put that in there and it just populated everything for me. So it was a pretty pleasant, uh, experience. Um, so Teri, one thing that I did, cause I was. I, my wife and I, we always file jointly, but this time I thought, well, I'm going to go ahead and try to file in, uh, um, what's, what's the other one? I'm sorry.

I can't even remember. Separately. Yeah. Separately. I don't know what, what's the term I'm looking for.

Terri: Oh, yeah, yeah. Instead of filing joint. Yeah. Yeah. So you're actually, um, did you file head of household or, um, but filing separately, all of a sudden there's just, there's some differences. So you, you tried both

out. So, on your TurboTax

Amy & Brandon: And then it gave you,

Terri: Okay. All right. What did you find?

But I thought, well, you know, this might be one of those times if you're an EV. and, uh, you can get maybe one of the spouses has a different tax appetite than the other. Maybe it'd be better to file that way. Have you, what was, what's your experience been with something like that? And, uh, and I know that, you know, we're not giving tax advice or anything like that.

We're just exploring things.

We should have

Terri: For sure, for

Amy & Brandon: that. This is just informational. This is,

Terri: you're right.

Amy & Brandon: not giving tax advice.

You bought a Tesla, and by the way, what kind of Tesla? Cause that's important. It's a very important

Amy & Brandon: I

got the Tesla model. Why?

So it technically I think

Terri: Nice.

Amy & Brandon: they used to qualify that as a sedan unless you got the seven seater then it was more of a EUV I think Which up the MSRP level? So but yes, I was Tesla Model Y So if it came in underneath the the MSRP limit as a sedan

And the MSRP now is an important discussion. So your own experience, which is like, finally, I'm excited about filing my taxes. Why? Because I can, in my mind, discount what I just paid for this vehicle.

Amy & Brandon: Yeah, exactly. And, and I know this year, the Tesla model three, we'll, we'll talk a little bit more about what vehicles don't, uh, qualify, but I know the model three doesn't. And I think I heard that the Ford Mustang Mach E doesn't. So we'll get to more of that. But yeah, this has been, it's been a good exercise and it's been pretty easy to find the thing.

And, uh, the, itemized portion of my tax return and to fill it out. So,

Can you give us an update on that? Is that, is that, is that what's going on now? Is it a point of sale now?

Terri: you want to start with the good news. So we first said we're not, but you also want to, so I, this was it. And this is, this is important for our listeners, you know, cause we're going to give you the good news first. And that's really about this. Your tax credit can become redeemable at the point of sale.

That is just great. The other part. Super important is that it no longer really matters if you owe taxes, okay? So the tax burden, um, if it's smaller than the full amount, so say, you know, you don't have 7, 500 in tax burden and, and so you kind of reduce that, that benefit, right? But this is no longer the, the, uh, the issue because transferability, you get that onto the, um, you know, the, the dealer, right? And the IRS is not going to recapture the difference. So if I owe 3, 000, I transfer the whole 7, 500 onto my dealership, right? Um, they're not going to play this game of recapture. So it also makes the pool of eligibility maybe a little

Amy & Brandon: Yeah. That's great.

So thank you very much. So I'm like, huh. Okay. So I thought, how many dealerships? How many new car dealerships are there in the U. S.? It's like that game of jelly beans, right? 71, 309 enterprises in new car dealers in the industry in the U. S. That's, that's the number. So how many of these guys have actually registered with the IRS in order to do this tax transferability, because that's important.

Your dealership has to register to do this game.

Amy & Brandon: Wow.

Terri: 000. So right now only about 10 percent of your dealerships in the U. S. Um, currently can provide that point of sale rebate. You're

Amy & Brandon: And income limit still applies for the purchaser and how does, well, we don't have to get too deep in the weeds, but how does that process work?

Amy & Brandon: Very different.

gov and that's a great resource to figure out if it qualifies for both components, uh, to meet the 7, 500 tax credit. Um, and you're right. So you had mentioned now the interesting thing, it's not all. So the Tesla model three, very, very popular. In fact, Tesla accounts still for about half of all EV sold in the U S right.

So look, look, look before you begin shopping and, you know, your heart becomes fixed on a particular vehicle

Amy & Brandon: That's good news about the Volkswagen ID4, you know, we're in Tennessee, we have Nissan Leaf is made here, the Cadillac Lyric is made here, the Volkswagen ID4 is made here,

LG is putting in a cathode plant in Clarksville, and of course, the Ford, uh, uh, big manufacturing campus that they're going to build in, in Southwest Tennessee,

Terri: Oh, yeah. Yeah.

Amy & Brandon: that's good news about Volkswagen for sure,

changes, right? And the manufacturers are scrambling, uh, to make sure, you know, that their cars actually qualify.

Okay.

So there's a separate commercial tax credit for EVs. It provides 7, 500 for light vehicles, 40, 000 for larger vehicles like delivery trucks, and there are fewer restrictions in place. So that's, that's something to kind of keep in mind, uh, for your particular question is when we think about, you know, the tax incentives, um, you know, tax incentives for, um, you know, charging equipment, you know, that still stays.

Amy & Brandon: Well,

you know, I know that we're even looking at, uh, some chargers that, uh, we might actually qualify for some credits because even though we're not for profit, the chargers we're going to put in are,

uh, in a disadvantaged community as defined by DOE. So we're exploring some of that and how that works. So, but if you're a business and you're going to add fleet vehicles or you're going to add charging, and let's say you're a nonprofit.

Or maybe a city entity. What kind of tax benefits should they be aware of?

That's important. The other part is leasing, leasing, um, because there are simply less restrictions. I, you know, I thought leasing might have a problem because all of a sudden you've got this point of sale, you know, rebate. To be honest with you, there, there seems to be kind of a, an evolving area. We're seeing a lot more EV leases, and this looks like it's getting a second, you know, second wind, um, because there are simply less restrictions.

Uh, and the nice part too, is it, uh, for the folks that are leasing you the, the equipment, the, the vehicles, you know, um, some of the burden will be on them in terms of making sure, uh, that. You know, that you qualify under these, you know, the evolving qualifications that we

have from the U. S. Treasury.

Amy & Brandon: So in in general, um, I think I think we've covered is there any more tax? Questions we have ,

I'm gonna have to just play this on repeat too.

Yeah,

And I try to keep that number. And, and every time I'm surprised by the numbers, but you are having a moment, um, which is, um. You know, I think in terms of electric vehicles, there are simply there's there is more inventory at the dealerships and that is actually good news for the buyer compared to internal combustion engines. And a lot of that was just because we had this point that we just could not keep up. With the EV buying, manufacturers do what manufacturers do, right? Which is respond to the market signals. And in this case, we might've had an over response to the market signals. Um, so you're hearing this, you're also hearing news about Hertz, for example, selling about a third of its electric vehicle fleet, but you know, that's not about the car experience.

I can't afford to get stranded. And if you're renting a car, you know, those concerns kind of pile on. So I, I don't think it's a pause. I actually do think that a lot of, uh, you know, a lot of folks, I think there's a greater amount of the population that's actually thinking about electric vehicles, but I do think you're going to have this, you know, the, the market, uh, manufacturers try to respond, they over respond.

So these are all issues we're kind of thinking about.

Amy & Brandon: well, thank you so much, Teri. As always, um, you just know so much like how you can just say all that and you don't have to have your notes in front of you. I'm always so amazed when when we interview you. I was like, how do you know all of that stuff in your head? But it's always great to talk with you.

And thank you so much for being with us today. And I'm quite sure we will circle back around with you. This time next year. I think this needs to be an annual thing because you, you are the one in the know, so we really appreciate you taking the time to be with us today.

We're, we're

Amy & Brandon: Good advice.

Good advice. Well, thanks to everyone for listening today. If you have any questions about MTE's EV Ready program, night flex rate, or anything EV related, email us. At ev car club@mte.com. For more information on MTS Drive, EV programs, or the EV car club, please visit drive ev.com or email us at ev car club@mt.com.

Until next time, plug in Power up and drive safe.