Understanding The New Federal Tax Credit For Electric Cars — It's Complicated

8/11/2022 3:50:00 AM

Understanding The New Federal Tax Credit For Electric Cars — It’s Complicated

Understanding The New Federal Tax Credit For Electric Cars — It’s Complicated

The federal tax incentives for electric cars in the Inflation Reduction Act will benefit many, but impose significant new restrictions.

. Battery materials that originally came from China become eligible for the new federal tax incentives if they are reprocessed in North America and used to produce new batteries for electric cars built in North America. The problem is there really aren’t that many batteries available for recycling yet, and there won’t be for years. As Elon Musk recently stated, it might be 12 or even 15+ years before an EV’s battery is ready for its next life. There aren’t many 12-year-old EVs on the road today, or many with batteries prematurely ready for recycling due to being in an accident or such.

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Year wait on a Tesla before the new credits. Should have put the $$$ into the grid

Most electric vehicles won't qualify for federal tax credit🔌 Some versions of Tesla’s Model Y SUV and Model 3 car, the Chevrolet Bolt car and SUV and the Ford Mustang Mach E would be eligible for at least part of the credit

How Do Electric Vehicle Tax Credits Work?Most EVs are eligible for the federal government's tax credit program, which can reduce what you owe the IRS by up to $7500 for single tax year. Israel drops bombs on civilians on Gaza Teslas and GMs could get credits again.

Hyundai And Kia May Need To Build More EVs In North America | CarscoopsHyundai and Kia could lose EV market share in the U.S. due to federal tax credit changes

How the EV Tax Credits in Democrats' Climate Bill Could Hurt Electric Vehicle SalesProposed tax credits of up to $7,500 for EVs under the Inflation Reduction Act could be counterintuitive for sales of EVs, according to several companies.

Most Electric Vehicles Won't Qualify for the Tax Credit in the Inflation Reduction ActThe Inflation Reduction Act requires that an EV must contain a battery built in North America with minerals mined or recycled on the continent to qualify for the $7,500 tax credit. And those rules become more stringent over time. No way lol For starters, here are the ones eligible and this legislation is long term so carmakers would be behooved to provide the qualifying e-cars “ some versions of Tesla’s Model Y SUV and Model 3 car, the Chevrolet Bolt car and SUV and the Ford Mustang Mach E You can’t make this shit up.

Ford’s New F-150 Lightning Truck to Get Price HikeThe car company’s new all-electric truck is getting a price increase fewer than four months after it started shipping to dealerships for the first time. … and US taxpayers are picking up the cost of the increase with EV credits in the new Dem Slush Fund bill that just passed the Senate. Don’t blame Ford…

battery recycling industry .politics FILE - A sales associate talks with a prospective buyer of a Cooper SE electric vehicle on the showroom floor of a Mini dealership July 7, 2022, in Highlands Ranch, Colo.Getty Images Update 8/9/22: The forthcoming passage of the Inflation Reduction Act is set to alter the federal government's EV tax credit scheme.August 10, 2022 Hyundai and Kia may have to increase the number of electric vehicles they produce in North America to remain competitive.

Battery materials that originally came from China become eligible for the new federal tax incentives if they are reprocessed in North America and used to produce new batteries for electric cars built in North America. The problem is there really aren’t that many batteries available for recycling yet, and there won’t be for years. (AP Photo/David Zalubowski, File) (David Zalubowski, Copyright 2022 The Associated Press. As Elon Musk recently stated, it might be 12 or even 15+ years before an EV’s battery is ready for its next life. The purpose of the program is to incentivize people to buy more fuel-efficient vehicles by bringing the price of EVs down closer to that of internal combustion vehicles. There aren’t many 12-year-old EVs on the road today, or many with batteries prematurely ready for recycling due to being in an accident or such.) DETROIT – A tax credit of up to $7,500 could be used to defray the cost of an electric vehicle under the Inflation Reduction Act now moving toward final approval in Congress. Chris Harto, CR ’s senior policy analyst for transportation and energy, says the provisions in the IRA might slow EV sales in the short term, but that it’s a “massively positive” benefit for EV adoption as a whole.S.

“Over the longer term automakers will adjust, bring their EV and battery manufacturing supply chains to North America, and ensure that American tax dollars are going to support American jobs,” he says. That's mainly because of the bill's requirement that, to qualify for the credit, an electric vehicle must contain a battery built in North America with minerals mined or recycled on the continent. Here's your quick guide to tax credits: what they are, how they work, and how they can benefit you. CleanTechnica The Hardest (& Best) Thing About The US Clean Vehicle Tax Credit .” “Even though some vehicles that currently qualify will become ineligible, those tax credits were going to run out eventually — and likely pretty quickly for most popular vehicles — so the benefit would have been short lived. As of now, the alliance estimates that about 50 of the 72 electric, hydrogen or plug-in hybrid models that are sold in the United States wouldn't meet the requirements.” Brett Smith tells Consumer Reports , “Generally, it’s going to be tough to create the processing here and really tough to create the mining here. The credits earned depend on a variety of factors and are used to decrease taxes you owed in a given year.” Questions Remain There are many unanswered questions about how the new tax incentives for electric cars will operate.” The idea behind the requirement is to incentivize domestic manufacturing and mining, build a robust battery supply chain in North America and lessen the industry's dependence on overseas supply chains that could be subject to disruptions. The automakers do have some plans for EV production in North America.

If you owe less than $7,500 in federal taxes and buy a car that qualifies for the full credit, do you get, a.) the amount of your tax liability? b. And the world's leading producer of cobalt, another component of the EV batteries, is the Democratic Republic of Congo. Every car that qualifies starts with a base incentive of $2500, and then for every 5 kWh of battery capacity, the vehicle qualifies for another $417 of credits.) $7,500? c.) bubkes? Frankly, we don’t know the answer. Ad Under the $740 billion economic package, which passed the Senate over the weekend and is nearing approval in the House, the tax credits would take effect next year. Here is a blurb from Kelley Blue Book that says you’ll get the full amount of the credit no matter what: “You must front the money for your car. The available tax credit is reduced by 50 percent for two quarters and then 25 percent for the subsequent two quarters.S.

Manufacturers often advertise the incentive as a discount on the car’s price. By 2027, that required threshold would reach 80%. Instead, it’s a government policy that allows you to claim up to $7,500 in credit against the federal income taxes you owe in the year in which you buy the car. In other words, it reduces your tax liability. A separate rule would require that half the batteries' value must be manufactured or assembled in the North America. If you’re eligible for a refund, you’ll get whatever the amount of your credit on top of that. “Buyers must still pay the price they negotiate for the car (whether paying it in cash or folding it into a car loan). Those requirements also grow stricter each year, eventually reaching 100% in 2029.5 percent share.

They can then claim the credit the next time they file their taxes. The credit lowers your tax liability. Automakers generally don’t release where their components come from or how much they cost. If your tax bill is lower than the credit, you’ll receive the balance as a refund. However, you can’t roll that credit or any remaining balance into the next tax year. All those vehicles are assembled in North America.” However, the legislation still hasn’t made it through the House of Representatives and been signed by Joe Biden, so we’ll have to wait for confirmation on all of this until that’s done and the experts decipher the final legalese.

There’s more. And any trucks or SUVs with sticker prices above $80,000 or cars above $55,000 wouldn't be eligible. Nowhere does the law clarify how all of this applies to Tesla and other companies that sell directly to consumers without a dealer involved. We know there is a new tax credit for used electric cars, but it specifically requires the sale must be made by a licensed dealer. The industry says the North American battery supply chain is too small right now to meet the battery component requirements. Tesla sells a lot of used cars. Does the credit for used cars apply to Tesla? Inquiring minds want to know. One component of the bill would require that after 2024, no vehicle would be eligible for the tax credit if its battery components came from China.

It appears that any company licensed to sell cars in a state is considered a “dealer” in the text of the bill, but we don’t know for sure if that does indeed mean Tesla, Lucid, Rivian, and others who don’t sell through traditional dealerships qualify. Please note: This article was written on Wednesday, August 10. Ad Sen. The IRA has not yet passed the House and has not been signed into law by the president. Any number of changes could take place between now and whenever a final version of the legislation is enacted. Joe Manchin of West Virginia, a critical Democratic vote, had opposed any tax credits for EV purchases. If there are errors or omissions in this article, it is probably because accurate information is currently unavailable.

When we know more, you’ll know more. “We’ll work through it and make this as good as we can for our automakers. .