Saturday, February 4, 2023

Beginning January 1, many Americans will be eligible for this tax credit.

WASHINGTON – Starting January 1, many Americans will qualify for a tax credit of up to $7,500 for buying an electric vehicle. The credits, part of changes enacted in the Inflation Reduction Act, are designed to encourage electric vehicle sales and reduce greenhouse gas emissions.

But a complex web of requirements, including vehicles and batteries that must be made in order to qualify, casts doubt on whether anyone can get the full $7,500 credit next year.

However, for at least the first two months of 2023, a delay in Treasury Department rules for the new benefit will make the full credit temporarily available to consumers who meet certain income and value limits.

The new law also offers fewer credits for those who buy used EVs.

Some electric vehicles that were eligible for a separate tax credit that began in 2010 and will expire this year may not be eligible for the new credit. For example, many EV models made by Kia, Hyundai and Audi would not qualify at all because they are made outside North America.

The new tax credit, which runs through 2032, aims to make zero-emissions vehicles affordable to more people. Here’s a closer look:

What’s new for 2023?

Up to $7,500 in credits will be given to people who buy certain new electric vehicles, as well as some plug-in gas-electric hybrid and hydrogen fuel cell vehicles. A $4,000 credit will be available to individuals purchasing a used battery operated vehicle.

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

What is known so far is that new electric vehicles must be manufactured in North America to qualify for the credit. Furthermore, caps on vehicle prices and buyer income are aimed at disqualifying wealthy buyers.

From March, complex regulations will also govern battery components. Forty percent of the minerals in the batteries would have to come from North America or a US Free Trade Agreement country or be recycled in North America. (That threshold will eventually go up to 80%).

And 50% of battery parts will need to be made or assembled in North America, eventually rising to 100%.

By 2025, battery minerals may not come from “foreign entities of interest”, primarily China and Russia. Battery parts cannot be obtained in those countries after 2024, a problematic constraint for the auto industry as many metals and electric vehicle parts now come from China.

There are also battery size requirements.

Which vehicles are eligible?

Due to the many remaining uncertainties, this is not entirely clear.

General Motors and Tesla have the most electric vehicles assembled in North America. Each also makes batteries in the US. But because of requirements about where batteries, minerals and parts must be made, buyers of those vehicles are likely to initially receive only half, $3,750, of the tax credit. GM says its eligible electric vehicles should qualify for a $3,750 credit in March, with the full credit available in 2025.

However, until Treasury issues its own regulations, the requirements will not apply to where minerals and parts must be sourced. This will allow eligible buyers to receive the full $7,500 tax incentive for eligible models beginning in 2023.

The Department of Energy says 29 EV and plug-in models were built in North America in the 2022 and 2023 model years. They are from Audi, BMW, Chevrolet, Chrysler, Ford, GMC, Jeep, Lincoln, Lucid, Nissan, Rivian, Tesla, Volvo, Cadillac, Mercedes and Volkswagen. However, not all of these vehicle models will be eligible for the credit, due to price limits or battery size requirements.

what about the price?

To qualify, the sticker price of a new electric sedan cannot exceed $55,000. Trucks, SUVs and vans cannot exceed $80,000. This would disqualify the two higher-priced Tesla models. Although Tesla’s best sellers, the Model 3 and Model Y, will be eligible, with options, those vehicles may exceed the price range.

Kelley Blue Book says the average EV now costs more than $65,000, although lower-priced models are coming.

Will I be eligible for the credit?

It depends on your income. For new electric vehicles, buyers cannot have an AGI of more than $150,000 if filing single, $300,000 if filing jointly, and $225,000 for head of household.

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

How will the credit be paid?

Initially, this will apply to your 2023 tax return, which you will file in 2024. Beginning in 2024, consumers can transfer the credit to a dealer to lower the price of the vehicle at the time of purchase.

Will credits increase EV sales?

Yes, but it will probably take a few years, says Mike Fiske, an associate director at S&P Global Mobility. The credit could lead to an increase in sales early next year due to the Treasury’s delay in issuing the stricter requirements. But most automakers are now selling all the electric vehicles they make and can’t make any more because of a shortage of parts, including computer chips.

And automakers can have trouble certifying sources of battery minerals and parts, requiring buyers to get full credit. Auto makers are scrambling to move more electric vehicle supply chains to the US.

How does the used vehicle credit work?

Consumers can receive a tax credit of up to $4,000 or 30% of the cost of the vehicle, whichever is less, for purchasing an electric vehicle that is at least two years old. But a used EV should cost less than $25,000, a tall order considering the starting prices of most EVs on the market. A search on Autotrader.com shows that the Chevy Bolt, Nissan Leaf, and other relatively affordable used EVs are trading at $26,000 or more for 2019 models.

On the other hand, used EVs are not required to be manufactured in North America or meet battery sourcing requirements. This means, for example, that a 2022 Kia EV6 that is not eligible for the new car credit because it is made in South Korea may be eligible for the old car credit if its price drops below $25,000.

“The real impact where these tax credits will have a big impact will be in the period 2026 to 2032, a few years in the future, as automakers prepare and increase volumes,” said Chris Harto, principal policy analyst at Consumer. Reporting magazine.

Why does the government offer loans?

The credits are part of an estimated $370 billion in clean energy spending, the largest investment in the United States to combat climate change, that was signed in August by President Joe Biden. Electric vehicles now account for about 5% of new vehicle sales in the US; Biden has set a target of 50% by 2030.

Sales of electric vehicles are on the rise, especially in California and other states that have moved to phase out gasoline-powered cars. The rise of low-cost competitors to Tesla, such as the Chevy Equinox with an estimated base price of around $30,000, is expected to broaden the reach of EVs in middle-class households. S&P Global Mobility expects the share of electric vehicles in car sales to reach 8% next year, 15% by 2025 and 37% by 2030.

Could the requirements be eased to allow more EVs to qualify?

It is not clear yet. Some US allies are troubled by North American manufacturing requirements that disqualify electric vehicles made in Europe or South Korea.

The requirements remove Hyundai and Kia from credit, at least in the short term. They plan to build new electric vehicle and battery plants in Georgia, but they won’t open until 2025. European Union countries fear that the tax credits could prompt their automakers to relocate their factories to the US.

The Treasury Department said it would release information by the end of the year on the “forward direction” of battery supply and mineral requirements. The easing of rules will make more electric vehicles eligible to address concerns of US allies. But it also risks increasing America’s dependence on foreign supply chains.

Are there credits for charging stations?

If you install an EV charger at home, you can get the credit. The new law revives a federal tax credit that was set to expire in 2021; Provides 30% of hardware and installation costs up to $1,000. Adds a requirement that the shipper must be in a low-income or non-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 electric vehicle chargers can cost between $200 and $1,000; Installation can add several hundred dollars more.

So should I buy now or wait?

It is a completely personal decision.

If you’re tired of fluctuating gas prices and are considering an EV, you might want to move on. Buying a qualifying EV in January or February can net you the full $7,500 tax break before the more stringent requirements take effect in March. Additional state credits may also be available.

But if you’re still undecided, there’s no urgency. With relatively few electric vehicles available, consumers eager to buy now may face price hikes from dealerships. Within a few years, the technology will improve and more EVs will qualify for the full credit.

Nation World News Desk
Nation World News Deskhttps://nationworldnews.com
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