Home News How Stricter Guidance Could Mean Fewer EVs Qualify for the $7,500 Federal Tax Credit

How Stricter Guidance Could Mean Fewer EVs Qualify for the $7,500 Federal Tax Credit

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Today, the US Treasury Department released new rules and regulations about electric vehicles that are still eligible for the federal $7,500 tax credit. The President Biden-signed Inflation Reduction Act explains this law. Unfortunately, these new guidelines make it more confusing than before and there will be fewer cars eligible for this credit.

The US government made a new rule which states that the minerals used to make electric car batteries (EVs) must come from America or other approved trading partners. This means that China won’t be allowed because the US thinks they are dangerous. Most of these batteries up until now have been made in China, so it isn’t clear if people who buy an EV on or after April 18th will get a special credit.

Battery makers can get a tax credit as long as they make or assemble at least half of their battery parts in North America and also source 40 percent of their critical minerals from the US or free trade partners. This will give them $3,750 each. These rules become stricter over time until 2029 when batteries must be made 100 percent in North America to qualify for the credits.

Some electric cars may still get a discount when purchasing them, but it’s not clear which cars are eligible. Even though the government tried their best to pick out through the current market, some cars won’t count anymore or will get lesser discounts. The official list of these cars will be published on April 18th.

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The US and Japan just signed an agreement which could make it easier for them to work together in the long run. The Biden administration announced a plan to give $2.8 billion to 20 different companies that build parts for electric cars. This money is from the Bipartisan Infrastructure Law, and will help create an “American Battery Materials Initiative” so that there are more parts available for electric cars by 2030, when President Biden aims for half of all car sales to be electric vehicles.

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