Most electric vehicles are not eligible for the $7,500 tax credit under the new IRA rules

The Latest guide about electric vehicle tax credit inside Inflation Reduction Act finally available now US Department of Treasury has published an overview of the subsidies. The new rules are supposed to take full advantage tram sold in the United States do not qualify for the tax credit, under New York Timesthough guidelines are subject to change pending the public comment period and what is likely to be further discussed between lawmakers in the United States and automakers.

In case you lost it:

The new rule effective April 18, and these begin by outlining household income, capped at $150,000 for individuals and $300,000 for couples. Anyone or any couple earning that amount is not eligible for any EV tax credits, nor any “clean new vehicles” on a given MSRP: Vans, SUV and pMinivans cannot exceed $80,000, while all others (perhaps sedans and wagons) cannot cost more than $55,000.

But those are just the basic requirements, because it gets more complicated from there. Prior to the latest rules outlined by the IRA, all electric vehicles sold in the United States were eligible for federal and state subsidies — that is, up to a certain number of vehicles sold by manufacturers. car manufacturing. This arrangement was more or less fine before all these fancy new electric cars started popping up, leading to the need to amend tax credits that were almost exhausted at a time when automakers old decided to take on newcomers like Tesla and Rivian.

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The advent of EVs from Ford, General Motors, Stellantis, Volkswagen and Toyota, just to name a few, coincided with supply chain disruptions that made U.S. legislators worry America was becoming too dependent on China for the electrification of its public and private auto fleet. So, Senator Joe Manchin introduced some provisions aimed at shifting the EV supply chain back to the US or at least to countries with free trade agreements with the US. And this leads to what many automakers consider unnecessarily strict rules.

The back-and-forth between industry and state is coming to an end (at least for now), and the latest rules in IRAs have broken down eligibility over the next few years into two different grants related to each other. with regards to sourcing important. minerals used in EV batteries and national battery assembly.

Both grants are worth up to $3,750 each, and they can combine to form the full $7,500 tax credit. Sourcing has softer requirements in place until 2027, while the country of assembly has stricter requirements in place until 2029.

By then, the “applicable percentage of the value of battery components” will have to be assembled 100% in the United States or in a country with a free trade agreement with the United States to qualify. Assembly requirements increase sharply, starting at 50% of battery adoption value in 2023, then 60% in 2024-2025, then 70% in 2026, 80% in 2027, 90% in 2028 and finally 100% in 2029. On the other hand, just before the end of the decade, the battery components in any new electric vehicle will have to be made entirely in the US or by one of our trade friends to qualify for the $3,750 tax credit.

The sourcing requirements, on the other hand, are less stringent, although they do require that a certain percentage of the battery’s key minerals and metals (nickel, cobalt, lithum and copper) come from the United States or its counterparts. United States free trade agreement. These numbers start at 40% in 2023, 50% in 2024, 60% in 2025, 70% in 2026 and then 80% in 2027.

But perusing the alphabet of numbers and letters in the manual, it’s worth mentioning that the EV tax credits are giving automakers a relatively short time to start making batteries in the UK. America or among free trade partners by 2029, and to start mining most metals and raw materials by 2027. And that’s only six and four years away.

But here’s the real bottom line: the new guidelines make it clear that any key mineral must be mined or processed in the United States, and that means most electric vehicles sold. here will not be eligible for the electric vehicle tax credit immediately after April 18, when the regulations go into effect IN.

In fact, there is a provision in the manual stating that electric vehicles have battery components from relevant foreign organizations (maybe China and Russia) will not be eligible for the EV tax credits starting in 2024, and neither will any EVs containing significant minerals mined or processed by these same related entities beginning with starting in 2025. That’s an impossibly short timeline to rule out the majority of modern EVs from being eligible for tax credits.

There are currently 91 electric vehicles being sold in the US, according to statistics Related press, but only a small fraction of them will qualify for the tax credit in the short term. Again, these rules are subject to change, and they have sparked a debate among US lobbyists and lawmakers.

America Curiously, the Treasury Department didn’t mention anything about the new electric car rentals being eligible for tax credits regardless of their country of origin. The NYT the lessor said The loophole still exists, but full rules mentions that eligibility for the subsidy only applies to electric vehicles where “the initial use of the motor vehicle must commence with the taxpayer” and goes on to say that “the motor vehicle must be purchase tax for use or rental, not for resale. “That will certainly be challenged in court and by people who are not lawyers but play them on the internet.