New Tax Credit Requirements to Limit Qualified Electric Vehicles for Tax Breaks

Beginning April 18, a new set of requirements that qualify certain electric vehicles for tax credits are set to change. Cheddar News reporter Chloe Aiello talks a change in tax code and what Americans purchasing EVs can expect. "The bill also requires eligible vehicles to be assembled in North America, which Reuters reported, eliminates about 70 percent of EVs currently on the market," she said.

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The Biden administration released a new set of rules on Friday that requires manufacturers to jump through even more hoops to qualify for federal subsidies. The new requirements for cars purchased on or after April 18 th concern batteries and critical minerals and experts say they will further limit the types of electric vehicles eligible for tax credits. This comes on the back of the passage of the inflation reduction Act in August which sought among other things to reduce reliance on China and combat climate change by encouraging renewable energy and the adoption of electric vehicles. The ira eliminated caps on subsidies per manufacturer but implemented other new restrictions like limiting the price of eligible vehicles and ensuring buyers meet certain income restrictions. For example, Americans seeking subsidies can only make up to $300,000 annually for couples filing jointly $225,000 for heads of households or $150,000 for individuals. In terms of pricing, vehicles can only cost up to $80,000 for trucks, vans or suvs or $55,000 for other vehicles. The bill also requires eligible vehicles to be assembled in North America which Reuters reported eliminates about 70% of EVs currently on the market. The new update from Friday means that cars must now also meet more stringent requirements for batteries and the minerals used to make them specifically in order to qualify for a $3,750 subsidy. Half of the value of battery components must be produced or assembled in North America. 40% of the mineral value must be sourced from the US or a free trade partner for an additional $3,750 tax credit. If a car qualifies in both areas, well, then it's eligible for the full $7500 credit. So you might be wondering what this means for buyers in the current economic environment. While supply disruptions low inventory, new technology, higher interest rates and automakers focused on high earning buyers means it's more expensive than ever to buy a car. According to cox auto average manufacturers suggested retail price or MS R P is now close to $50,000. In December 2017, there were about 36 models with MS R P S below $25,000 in December 2022. By contrast, there were only 10 models in that range. This plus higher interest rates have shut out certain shoppers. And since E V S tend to be more expensive than internal combustion vehicles, a cut in E V subsidies could make E V ownership even car ownership in general less viable for many Americans Duarte. Thank you so much. That was senior news reporter Chloe A.