Credits for electric vehicles have completely changed. Here’s what that means for car buyers

The old credit offered $7,500 to buyers of new electric vehicles until their automaker reached a limit of $200,000 for available tax credits. Plug-in hybrid buyers received less credit.

The new law also imposes new restrictions on the price of vehicles, as well as limits on the income of the buyer.

How to benefit from the tax credit?

There are many strict requirements for electric vehicles to qualify for the tax credit under the new law, which comes into full effect on January 1, 2023. Vehicles must be assembled in North America. Much of their production of battery components and battery minerals must be done in North America. From 2023, 40% of the critical minerals used to create a vehicle’s battery must be mined or processed in the United States, or in a country that has a free trade agreement with the United States, for the vehicle is eligible. By 2027, that number will increase to 80% of battery minerals. The battery component requirement calls for 50% to be manufactured or assembled in North America beginning in 2023 and 60% in 2024 and 2025. This number will gradually increase to 100% in 2029.

Under the new credit system, the MSRP of a pickup truck or SUV must not exceed $80,000, and other vehicles such as sedans must not exceed $55,000. A buyer’s income must not exceed $150,000 if single, $225,000 if head of household or $300,000 if married.

Buyers of a used electric or plug-in hybrid vehicle for the first time can receive up to $4,000.

You must also purchase a vehicle before December 31, 2032.

Tesla vehicles could become eligible for the tax credit again next year as the 200,000 unit cap is lifted.

What is the amount of the tax credit?

New vehicles are eligible for up to $7,500, provided their final assembly takes place in North America. Half of the credit – $3,750 – depends on meeting the battery mineral requirements, and the other half depends on the battery component requirements.

There is a new credit for certain buyers who purchase a used electric vehicle for up to $4,000. The credit may not exceed 30% of the sale price of the vehicle.

Which vehicles are eligible for the $7,500 tax credit?

No electric vehicle currently available for purchase will qualify for the full tax credit when the supply requirements take effect in 2023, according to the Automotive Innovation Alliance, which represents automakers like Ford, GM, Hyundai, Toyota and Volkswagen. The new tax credit significantly reduces the number of qualifying vehicles. Seventy percent of electric, hybrid and fuel cell vehicles eligible for purchase in the United States are now not eligible for any credit, including partial credit, according to the trade group.

Popular electric models like the Hyundai Ioniq 5 and Kia EV6 will lose eligibility under the new rules unless manufacturers make changes such as where the vehicles are assembled.

Teslas, including the popular Model 3 and Y, were not eligible for credit under the passed structure since January 2020, when the company hit the previous limit of 200,000 vehicles per automaker. However, this limit will be lifted on January 1, 2023, and Teslas will once again be eligible for a tax credit, provided the company meets all other new requirements.

Consumers can enter a vehicle’s vehicle identification number on a U.S. Department of Transportation website to see where its final assembly occurs to determine if the vehicle is eligible for the tax credit under the new law.
The Volvo S60 Recharge will be among the vehicles eligible for the credit until the end of the year.

Are there exceptions?

Some electric and plug-in hybrid vehicles remain eligible until the end of the year due to a quirk in the bill. The North American assembly provision went into effect when Biden signed the bill, but nothing else. Consumers interested in electric vehicles made in North America may want to consider a purchase before January 1, when the most stringent requirements begin.

Nissan has confirmed to CNN Business that the Leaf will remain eligible for full credit until the end of 2022. Volvo expects the S60 Recharge to continue qualifying until the end of the year, according to the guidance of the Department of Energy.

The Mercedes-Benz EQS SUV is expected by the manufacturer to be eligible until the end of the year, but not the EQS sedan because, unlike the SUV, it is not assembled in the United States. BMW says the X5 plug-in hybrid and the 3-series plug-in hybrid will both be eligible for the remainder of 2022.

Ford says its electric and plug-in vehicles, including the Mustang Mach-E, F-150 Lightning and Escape plug-in hybrids, will be eligible for the rest of the year.

These vehicles should be delivered by the end of the year.

Rivian vehicles are manufactured in North America, but new orders placed in the final months of the year are unlikely to get the credit as the automaker has an order backlog that exceeds its production target for the year. year, so customers would not take delivery until 2023.

Automakers and consumers are in a state of uncertainty for 2023 as the government finalizes the tax credit. It is unclear, for example, how the government will determine whether a vehicle meets the battery mineral and battery component thresholds. Ultimately, the IRS will provide a list of vehicles to consumers indicating the amount of money they are eligible for.

Buyers of a new Nissan Leaf will be eligible for the tax credit until Dec. 31, the automaker said.

Why are there so many more restrictions?

Senator Joe Manchin, a critical vote, worried about the United States’ reliance on foreign countries for electric vehicle components. Manchin noted that the United States is building its own gasoline-powered vehicles and engines, suggesting the country should be able to do the same with electric vehicles and batteries. The tax credits could incentivize automakers to shift battery metal mining and processing, as well as vehicle assembly, to North America. Some experts have warned of national security risks associated with reliance on foreign countries for electric vehicles.

If I find an eligible vehicle, how soon can I get the tax credit money?

Initially, buyers will have to wait to receive the tax credit when they file their taxes. But from January 1, 2024, EV buyers will be able to receive the cash immediately, at the point of sale, if they agree to transfer the credit to their dealership.

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