March 13, 2023

The Inflation Reduction Act and EV charging: What you need to know

Tesla Model 3 being charger in a driveway using a JuiceBox

It’s an exciting time to watch the complete transformation of the automotive industry. In the past year alone, there has been a tremendous amount of global government activity advancing electric vehicles and charging infrastructure.  


In the US the Biden administration rallied behind a pledge to make 50% of car sales EVs by 2030, and a target of reducing greenhouse gas emissions to 50% below 2005 levels by 2030. Late in 2022, the administration—and the country as a whole—took a huge step towards delivering on both of those with the passage of the Inflation Reduction Act.  


What is the Inflation Reduction Act? 

The 2022 Inflation Reduction Act—which President Biden has called the US’s “biggest step forward on climate ever”—authorized $370 billion in spending on energy and climate change. The Act will address climate change by tackling US greenhouse gas emissions from multiple angles, and could reduce the country’s greenhouse gas emissions to 40% below 2005 levels by 2030.  


What electric vehicle and EV charging initiatives will the Inflation Reduction Act fund? 

The Inflation Reduction Act will use different funding methods to advance the adoption of electric vehicles (EVs) and expand the EV smart charging network. Here are just a subsection of the programs and agencies that will be funded:  


  • The US Postal Service will get $3 billion to help electrify its fleet, money that can be spent on both EVs and charging infrastructure like Enel X Way’s array commercial smart chargers.

  • $3 billion will go to the Advanced Technology Vehicle Manufacturing program, which loans money to auto manufacturers at U.S. Treasury rates. Loans are extended to manufacturers of charging infrastructure, critical materials manufacturing, and other parts essential to the building of zero emissions vehicles.  

  • $2.25 billion will go to port authorities to help them reduce air pollution at ports with zero-emission technology like electric freight vehicles and container handlers.  

  • The Domestic Manufacturing Conversion Grant program will get an additional $2 billion, which grants money to American automotive manufacturers to produce hybrid, electric, and hydrogen fuel cell vehicles.  

  • States, municipalities, Indian tribes, and non-profit school transportation associations will get a combined $1 billion to replace larger vehicles like tow and trash trucks, smaller semis, and school and city transit buses with EVs. The money can also be used for charging infrastructure and a host of activities that support electrification.  

  • $60 million will go to the Diesel Emission Reduction Act program, which has been funding initiatives since 2007 to retrofit, replace, or repower diesel engines to reduce emissions.  


The majority of the $391 billion won’t go to government entities, it will go to the Inflation Reduction Act EV tax credit for individuals and businesses. Note that tax credits aren’t rebates; you don’t get a check months after buying a new EV or EV charger.  


Here’s the difference, simply put:  


  • A tax credit is a dollar-for-dollar reduction in the amount of income tax paid. For example, if you got a $7,500 tax credit from purchasing a new EV and you owed $10,000 in taxes, your tax bill would be reduced to $2,500.  

  • A rebate is a direct payment made to you after you buy something, generally in the form of a check. 


The Inflation Reduction Act will fund several tax credits, some new, some already in place. The list is long and can be quite confusing, so let’s break down the different tax credits on offer.   


A look at the Inflation Reduction Act EV tax credits 

The tax credit you may be most familiar with is the Clean Vehicles Credit. Some version of it has been around since 2005, and the Inflation Reduction Act will extend it for another ten years.  


Now, both individuals and businesses can get up to $7,500 in tax credits for buying new plug-in hybrid, EV, or fuel cell vehicles purchased between 2023 and 2032. The new provisions require vehicles to be assembled in North America, which makes figuring out which vehicles apply far less straightforward. Even a different trim of the same make and model (e.g., the Ford Mustang Mach-E vs. the Mach-E GT) could be manufactured outside North America.  


Your best bet is to get the Vehicle Identification Number (VIN) of the vehicle you’re considering purchasing and use the Department of Energy website to see if it qualifies.  


The Inflation Reduction Act added a tax credit up to $4,000 for the purchase of used EVs and fuel cell vehicles for $25,000 or less, as long as they’re bought from a licensed dealer, and it’s at least two model years older than the year you buy it. Here is an up-to-date list of all the vehicles that qualify.  


The other large category in the Clean Vehicles Credit is for commercial vehicles bought by businesses and tax-exempt organizations. This tax credit is a little more complex: the amount you get depends on the cost of the vehicle. Your credit ends up being the lesser of these two costs:  


  • 15% of the vehicle’s cost including taxes, fees and registration if it uses gas or diesel (30% if it’s fully electric or uses hydrogen fuel cells) 

  • the list price minus the manufacturer's list price for the same vehicle running exclusively on gas or diesel 


Either way the credit maxes out at $40,000 for vehicles weighing over 14,000lbs and $7,500 for smaller vehicles.  


Note that all these credits are nonrefundable, which means the IRS won’t pay you the difference between the tax credit and your tax bill if your bill is less than your credit. For instance, if your tax bill is $5,000 and you have a $7,500 tax credit, you’ll pay nothing in taxes, but you won’t see a $2,500 refund from the government. And what’s more, excess credit can’t be rolled over to future tax years; that portion of the credit is just lost. 


The Inflation Reduction Act tax credit for EV charging infrastructure 

The Inflation Reduction Act extends the Alternative Fuel Vehicle Refueling Property Credit through 2032, giving individuals and all types of organizations tax credits for EV charging infrastructure installed in low-income and rural areas.  


Individuals get 30% of the purchase and installation cost credited, up to $1,000. Businesses can also get 30% of their costs credited, up to $100,000 per charging station, if they meet three requirements:  


  • build in eligible census tracts (this interactive map shows which tracts are eligible, though be sure to double check as it uses 2019 data)   

  • pay anyone employed to install the charger(s) at least the prevailing rates for construction in the project locality

  • ensure that qualified apprentices account for 12.5% of the total labor hours for construction that begins before January 1, 2024, 15% for construction that begins on or after Jan 1, 2024 


All chargers must be at least Level 2 smart chargers, like Enel X Way’s JuiceBox 48 for home or the JuiceBox Pro 40 for businesses. 


How the Inflation Reduction Act impacts the future of EVs 

Analysis of the Inflation Reduction Act found that electrifying transportation makes up 29% of the Act’s impact on greenhouse gas emissions, second only to renewable energy (36%). If the Act’s sheer dollar investment in EVs and EV charging infrastructure wasn’t a strong enough signal to the market that EV adoption is about to ramp exponentially, the importance of electrifying transportation to the Act’s success should be.  


The federal government is laser focused on accelerating the future of EVs, and industry has largely caught on. In late 2022, Ford’s CEO explained to dealers nationwide that they could either invest in smart EV fast chargers like Enel X Way’s 175kW DC fast charger at their dealerships—enabling them to carry Ford EVs—or sever their relationship with Ford altogether. 


Other evidence of the pace of investment in EVs and charging infrastructure abounds: in 2022, U.S. companies put $700 million into the EV charging industry. Plus, companies infused $13 billion in domestic EV manufacturing and $24 billion in battery production, 3x and 28x the investment in 2020 respectively. 


Between now and 2030 we’ll see all things EV move from cutting edge to mass market, making now one of your last chances to join the early adopters. 

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