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Many electric cars will no longer be eligible for tax credits in the US. Know the changes

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Many electric cars will no longer be eligible for tax credits in the US
Many electric cars will no longer be eligible for tax credits in the US
Khushbu Kumari

With the signing of the Inflation Reduction Law, the eligibility rules for tax credits associated with the purchase of electric cars change, depending on the price of each vehicle and even its year of manufacture

With the signing of the Inflation Reduction Act, the rules for electric car eligibility in the United States change and, at various points, have been made stricter.

Until before the new law was signed, electric car credits offered up to $7,500 for new buyers of these types of vehicles, while manufacturers had a limit of 200,000 units for tax credits available .

However, with the new law, which was signed into law this week by President Joe Biden, the 200,000-vehicle limit disappears, but the eligibility rules for buyers also change.

What has not changed with the new law is that hybrid cars, those that can operate with an electric motor or gasoline combustion, are still eligible for a partial tax credit .

New stricter rules

Although one of the objectives of the Biden administration is to promote the expansion of electric vehicles, the new eligibility rules for the tax credits associated with these cars have become more complex.

One set of rules targets the manufacturing and assembly processes for new electric vehicles, favoring those made in the North American region and the United States.

In fact, vehicles eligible for tax credits must be assembled within the region and their components made in the United States , even partially.

Starting next year, at least 40% of the basic minerals with which batteries for electric vehicles are manufactured must have been extracted or processed in US territory or in a country with which they have a free trade agreement, like Mexico and Canada.

The percentage will increase year after year until it reaches 100% in 2029 , according to the rules of the new law signed by President Biden.

Limits on prices and entrance fees

The new rules also establish new ceilings for the suggested prices of electric vehicles, so that they can be eligible for a tax credit.

Under the law, the MSRP for an electric or hybrid truck or SUV must be no more than $80,000, while for a sedan, the maximum MSRP must be $55,000 .

But the eligibility limits also target buyers' income if they want to qualify for a tax credit when they buy an electric car.

The tabulators indicate that a buyer's annual income should not exceed $150,000 if single and $225,000 a year if head of household or $300,000 if married.

But the tax credits won't just be given to new-car buyers — used electric and used plug-in hybrids are also eligible to receive up to $4,000 for the first time .

For its part, the tax credit for new electric cars will be $7,500 , but this amount will depend on whether its final assembly takes place in North America.

An important detail has to do with the extraction or processing of minerals to manufacture the battery, a requirement on which 50% of the total amount of the tax credit depends .

What electric cars are eligible

The new rules also make it more difficult for buyers looking for an electric car, as the number of eligible vehicles will be reduced by more than 70% from January 1, 2023.

For now, it seems that one of the few models that will be eligible during 2023 will be the Nissan Leaf .

However, brands like Volvo, with its S60 Recharge, hope that it can meet the new specifications; while Mercedes Benz detailed that its EQS models will be eligible for the rest of the year, but not the EQS sedan, because it is not assembled in the United States.

BMW said its X5 plug-in hybrid and the identical 3 Series will be eligible later this year, as will the Ford Mustang Mach-E, F-150 Lightning and Escape .

Those that would be left out for the moment are the popular Hyundai Ioniq 5 and the Kia EV6 under the new rules.

However there is no change in the car insurance or the auto insurance rules as per the government and the car lawyer.


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