A complete guide to the new EV tax credit – TechCrunch

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Tucked inside the The massive Inflation Reduction Act of 2022 that was signed into law in August is a complex set of requirements around which electric vehicles and other clean vehicles are eligible and ineligible for a $7,500 tax credit for electric vehicles. T1; Not all new EVs or other clean vehicles (and even used ones) are created equal in the eyes of Congress and President Biden, who signed the bill into law.

The Inflation Reduction Act (IRA) covers a lot, including a number of climate and energy provisions. It also changes the qualifying plug-in electric motor vehicle credit (also known as CRI 30D), which offered consumers up to $7,500 in tax credits for the purchase of a battery electric vehicle and certain plug-in hybrid vehicles. This reworked law, now called the Clean Vehicle Credit, includes a reduced credit of $4,000 for used electric vehicles and adds other clean vehicles into the mix, such as “qualified fuel cell vehicles.”

Eligibility for the tax credit is another matter. The law includes a number of new requirements which include personal adjusted gross income, where the EV was assembled and sticker price, according to Dean Taylor of Dean Taylor Consulting and the Zero Emissions Transportation Association. It also raised the threshold for plug-in hybrids. New PHEVs must be equipped with 7 kWh batteries to qualify for the electric vehicle tax credit.

Does this new EV or PHEV you are considering qualify for the EV tax credit?

Step 1: Where the electric vehicle is assembled matters

For consumers purchasing a new EV or PHEV model, start by determining if the vehicle you are considering is assembled in North America. If not, you can say goodbye to that EV tax credit.

The Clean Vehicle Credit has added a new requirement for final assembly in North America that came into effect on August 16, 2022.

What if you bought an electric vehicle before August 16th and you didn’t know this rule, and you put it to hell, now what? The IRS advises that if you entered into a binding written contract to purchase the new eligible electric vehicle before August 16, but did not take possession of the vehicle until after that date (for example, because the vehicle did not has not been delivered), you can claim the EV credit according to the old rules that were in effect. Hooray!

What if you bought a new electric vehicle after August 16, 2022 and you don’t know exactly where the vehicle was manufactured? Or are you considering buying one and not sure if it was assembled in the USA, Europe or Japan?

There is a VIN decoder tool which is operated by the National Highway Traffic and Safety Administration which allows consumers to enter the Vehicle Identification Number on any vehicle to determine where it is assembled. Once you have entered the VIN, a new page will appear. Scroll down to find build factory and country information.

It’s important to verify this, if you can, because some models are built in multiple locations and may not meet final assembly requirements under all circumstances, according to the IRS.

Today, there are 20 new electric vehicle models assembled in North America that would qualify, according to a list provided by the Department of Energy. This list is expected to grow over time as manufacturers like VW Group open new factories in the United States.

Just because a model is on this list, let me repeat, doesn’t mean you’ll get credit for it. Keep reading to find out why.

Step 2: The cap until January 1

Sweet, it’s made in North America! But wait. For now, and until the end of 2022, there is another factor that may cause you to delay your purchase.

Some manufacturers who have vehicles assembled in North America have sold 200,000 electric vehicles. This is important because under the old rule there was a 200,000 vehicle cap on credits. Once a manufacturer hits this cap, the credit would drop 50% and then eventually drop to zero. Today, GM (which covers Cadillac, Chevrolet, GMC) and Tesla have reached the manufacturer cap and are not currently eligible for the clean vehicle credit.

This means that if you want to buy a new Chevy Bolt today – an electric vehicle made in the United States – it will not be eligible for the clean vehicle credit. But if you wait until January 1, 2023, those old 200,000 vehicle limit rules will disappear and you can get that electric vehicle tax credit again.

Oh, but wait. Yes, another step. Or five.

Step 3: Where the battery components are assembled matters

There is an important nugget on page 366 of the IRA that adds a requirement for battery components from 2023.

To begin with, the law states that after 2023 vehicles will not be eligible for the EV tax credit if any battery components are manufactured or assembled by a “foreign entity of concern” as defined by the Infrastructure Investment and Employment Act. A foreign entity of concern includes organizations, governments, certain businesses, and even individuals. For example, Huawei in China is a foreign listed entity of concern.

But there is more.

About half of the total $7,500 credit is based on a requirement that battery components are manufactured or assembled in North America. This means getting the designated $3,750 for this requirement the percentage of the value of battery components that were manufactured or assembled in North America must exceed a certain threshold. And it’s growing every year.

Electric vehicles introduced before January 1, 2024 must exceed a threshold of 40% battery components assembled in North America. Electric vehicles coming to market in 2024 must exceed 50%. And it goes up from there:

  • 60% for electric vehicles put on sale in 2025
  • 70% for electric vehicles put on sale in 2026
  • 80% for electric vehicles offered for sale after December 31, 2026

Let’s translate this for you. It’s 2024 and you’re buying an electric vehicle that’s assembled in North America and 41% of its battery components are also assembled in the region. Congratulations, you have met half of the EV tax credit criteria and you will receive $3,750.

Let’s talk about the other half of the credit.

Step 4: The origin of the battery materials is important

Just like the components of the battery, the law addresses the problematic question of the origin of the raw materials used in the battery.

After 2024, any vehicle with “critical minerals” that have been mined, processed or recycled at a “foreign entity of concern” will not be eligible for the other half of the $7,500 (ie $3,750) EV tax credit.

That same year, the law imposed a percentage requirement as to the origin of these critical minerals. In short, a certain percentage of critical minerals must be mined or processed in countries with which the United States has a free trade agreement.

JThe percentage requirement can also be met if they were recycled in North America. This recycling part is going to get even more important as these percentages increase, which means big business for startups like Redwood Materials.

Percentage requirements:

  • 40% of critical minerals by the end of 2023
  • 50% in 2024
  • 60% in 2025
  • 70% in 2026
  • 80% after 2026

So what is a critical mineral, anyway?

The law has a long list of critical minerals, which includes aluminum, antimony, barite, beryllium, cerium, cesium, chromium, cobalt, dysprosium, europium, fluorspar, gadolinium, germanium, graphite, indium, lithium, manganese, neodymium, nickel, niobium, tellurium, tin, tungsten, vanadium and yttrium . These all have varying minimum purity requirements of between 80% and 99.9%. There is also a list of minerals that must be distilled to at least 99% purity. These are arsenic, bismuth, erbium, gallium, hafnium, holmium, iridium, lanthanum, lutetium, magnesium, platinum, praseodymium, rhodium, rubidium, ruthenium , samarium, scandium, tantalum, terbium, thulium, titanium, yttrium, zinc and zirconium.

Step 5: The price of the EV sticker is important

Price matters, but not before January 1st.

New battery-electric cars that cost more than $55,000 are not eligible for the electric vehicle tax credit. This price threshold increases to $80,000 for new battery-electric SUVs, vans or pickups.

And no, there is no adjustment for inflation.

Step 6: Your income matters

Income matters.

Consumers who find that perfect electric vehicle that meets all of the above requirements still have to clear one final hurdle to qualify for the tax credit: an income cap.

Single filers are eligible if their income is less than $150,000. For heads of households, this income limit increases to $225,000. Co-filers are eligible for the EV tax credit if their income is less than $300,000.

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