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Electric vehicle tax credits FAQ: what to know about how they change for 2023

WASHINGTON (AP) — Beginning January 1, many Americans will be eligible for a tax break of up to $7,500 on the purchase of a car. tram. Credits, part of the changes enacted in Inflation Reduction Actdesigned to boost sales of electric vehicles and reduce greenhouse gas emissions.

But a complex set of requirements, including where the vehicle was made and the battery to be eligible, is casting some doubt as to whether anyone will be able to get the full $7,500 credit next year. come or not.

The Ministry of Finance is rolling outside More information on eligible cars and how individuals and businesses can access credit starting in 2023. One major loophole allows for tax credits on electric vehicles purchased for “commercial” use, such as lease or ride-sharing, even if they’re made abroad, is plaguing Senator Joe Manchin, DW.Va., who says it could break the intent of legislation in favor of American manufacturing.

However, for at least the first two months of 2023, delay in some Treasury rules will likely make full credit Temporarily available to consumers people who meet certain income and price limits.

The new law also offers a smaller line of credit to people who buy used electric vehicles.

Some electric vehicle brands that were eligible for a separate tax credit starting in 2010 and ending this year may not be eligible for the new credit. Some EV models made by that, hyundai and audiofor example, would not qualify because they were manufactured outside of North America.

The new tax credit, which runs through 2032, is aimed at making zero-emissions vehicles affordable for more people. Here’s a closer look at it.

WHAT’S NEW FOR 2023?

Up to $7,500 in credit will be offered to buyers of certain new electric vehicles as well as certain gas-electric and hydrogen-powered hybrids fuel cells vehicle. For those who purchase a used battery-powered vehicle, a $4,000 credit is available.

But the question of which vehicles and buyers will qualify for the credit is complex and will remain uncertain until the Treasury Department issues the proposed rules in March.

What is known so far is that to be eligible for the credit, the new electric vehicle must be manufactured in North America. In addition, the ceilings on car prices and buyer income are intended to weed out more affluent buyers.

Starting in March, complicated terms will also govern battery components. Forty percent of battery minerals would have to come from North America or a country with a free trade agreement with the United States, or be recycled in North America. (That threshold will eventually go up to 80%.)

And 50% of battery parts will have to be manufactured or assembled in North America, which will eventually increase to 100%.

Starting in 2025, battery minerals cannot come from a “worrisome foreign entity,” primarily China and Russia. Battery parts cannot be sourced in those countries starting in 2024 – a troubling setback for the auto industry as many metals and EV parts are now sourced from China.

There are also battery size requirements.

WHAT VEHICLES ELIGIBLE?

Since there are many uncertainties, it is not entirely clear. However, the Ministry of Finance publish the original list of vehicles that meet the requirements to claim the new clean vehicle tax credit starting January 1, including forms from Chrysler, Ford, Jeep car, Lincoln, Nissan and Rivian. More vehicles will be added to the list in the coming weeks and months.

The Department of Energy also maintains Eligible EV list.

General Motors and Tesla have the most electric vehicles assembled in North America. Each also manufactures batteries in the United States. But given the requirements for where the batteries, minerals, and parts must be made, it’s likely that people who buy those cars will initially receive only half of the tax credit, $3,750. GM says its eligible electric vehicles will be eligible for the $3,750 credit in March, with the full credit available in 2025.

However, until the Treasury Department issues its rules, the requirements governing where minerals are mined and parts must be waived. This will allow eligible buyers to receive the full $7,500 worth of tax incentives on eligible vehicle models as early as 2023.

ABOUT WHAT’S PRICE?

To qualify, the new electric sedans must not have a list price above $55,000. Pick it up vans, SUVs and trucks must not exceed $80,000. This will eliminate the two higher priced Tesla models. While Tesla’s best-selling models, the Model 3 and Y, will qualify, with options, those models can go over the price cap.

Kelley Blue Book says the average EV currently costs more than $65,000, though lower-priced models are popping up.

WILL I ELIGIBLE FOR CREDIT?

It depends on your income. For new electric vehicles, buyers cannot have adjusted gross income above $150,000 if single, $300,000 if filing jointly, and $225,000 if head of household.

For used electric vehicles, buyers cannot earn more than $75,000 if single, $150,000 if filing jointly, and $112,500 if head of household.

HOW WILL THE CREDIT BE PAYED?

It will initially apply to the 2023 tax return you file in 2024. Starting in 2024, consumers can pass a credit to the dealer for a discount on the car’s purchase price.

WILL CREDIT INCREASE EV SALES?

Yes, but it will probably take a few years, said Mike Fiske, vice president of S&P Global Mobility. The credit could lead to a sharp increase in sales early next year as the Treasury Department is slow to issue stricter requirements. But most automakers currently sell all the electric vehicles they build and can’t produce more due to a shortage of parts, including computer chips.

And automakers can have a hard time confirming the source of minerals and battery parts, a requirement for buyers to receive full credit. Automakers are scrambling to move more electric vehicle supply chains to the US

HOW DOES USED CREDIT-EV WORK?

Consumers can get a tax credit of up to $4,000 — or 30% of the car’s price, whichever is less — when buying an electric vehicle that’s at least two years old. But used EVs should be under $25,000 – an order of magnitude higher than the starting price of most EVs on the market. A search on Autotrader.com shows Chevy Bolt, Leaf Nissan and other relatively economical used electric vehicles listed at $26,000 or more for models launched in 2019.

Used EVs, on the other hand, are not necessarily made in North America or comply with battery sourcing requirements. That means, for example, a Kia EV6 2022 ineligible for a new car credit because it was made in Korea may qualify for a used car credit if its price falls below $25,000.

“The real impact of these tax credits will have a big impact between 2026 and 2032 – a couple of years into the future – when manufacturers will have a big impact,” said Chris Harto, senior policy analyst at Consumer. automobile production accelerates and output increases”. Journal report.

WHY DOES THE GOVERNMENT PROVIDE THE CREDIT?

The credits are part of about $370 billion in clean energy spending — the largest U.S. investment to combat climate change – that was signed into law by President Joe Biden in August. Electric vehicles now account for about 5% of US new car sales; Biden has set a goal of 50% by 2030.

Electric vehicle sales are on the rise, especially as California and other states have moved to phase out gas-powered cars. the rise of lower cost competitor to Tesla, such as Chevy Equinoxwith an expected base price of around $30,000, expected to extend the reach of electric vehicles to middle-class households. S&P Global Mobility expects electric vehicle market share car sales reaching 8% next year, 15% in 2025 and 37% in 2030.

CAN THE REQUIREMENTS BE EASILY TO MAKE EV ELIGIBLE?

Looks like that could happen. Some U.S. allies are unhappy about North American manufacturing requirements that make electric vehicles manufactured in Europe or South Korea ineligible.

These requests have excluded Hyundai and Kia from the credits, at least for the short term. It plans to build new electric vehicle and battery plants in Georgia, but those won’t open until 2025. European Union countries are concerned that the tax credits could put the companies at risk. Their automakers moved factories to the United States.

However, there is a loophole. The law appears to exempt commercial vehicles from North American assembly and domestic battery mineral and parts requirements. That means rental car and rental companies with huge fleets of cars and full-time electric vehicles for carpooling like Uber and Lyft can qualify for a tax credit of up to $7,500 even on cars foreign-made electricity. A fact sheet released by the Treasury on Thursday claims it will allow for an exemption for commercial vehicle, which the department says it must do based on the wording of the law.

That move drew the anger of Manchin, a key voter in the passage of the Inflation Reduction Act, who on Thursday accused the Biden administration of indulging in foreign wishes. The exemptions, he said, undermine the intent of the law to “bring our manufacturing and energy supply chains ashore to protect our national security, reduce our dependence on foreign partners.” foreign players and create jobs right here in the United States.”

Manchin said he will introduce legislation in the coming weeks to “prevent this dangerous interpretation from the Treasury in the future.”

Is there a CREDIT FOR CHARGING STATION?

If you install EV charger At home, credits may be available. The new law restores the federal tax credit that expired in 2021; it offers 30% of hardware and installation costs, up to $1,000. It additionally requires the charger to be in a low-income or out-of-urban area. Businesses that install new EV chargers in those areas can receive a tax credit of up to 30% — up to $100,000 per charger.

Residential EV chargers can cost anywhere from $200 to $1,000; installation can add several hundred dollars.

SO BUY NOW OR WAITING?

It is purely a personal decision.

If you’re tired of fluctuating gas prices and are considering buying an electric car, you might want to move on. Buying an eligible EV in January or February could get you a full $7,500 tax break before the stricter requirements take effect in March. Additional state credits may also be available.

But if you’re still wondering, there’s no urgency. Consumers in a rush to buy now, when relatively few qualified electric vehicles are available, could face dealer price disparities. Within a few years, technology will improve and more electric vehicles will be eligible for full credit.

WHERE CAN I FIND MORE INFORMATION?

The Ministry of Finance on Thursday released a number of frequently asked Questions A brochure for retail and commercial customers about the clean car tax credit to help them understand how to access different tax incentives.

The ministry also released a White paper explains the prediction direction it is taking before implementing the proposed rule.

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Krisher reports from Detroit. Associated Press writer Fatima Hussein contributed to this report.



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