Buy Now? After April 18, Fewer EVs May Qualify for $7,500 Federal Tax Credit
The IRS will begin enforcing strict battery-sourcing requirements for electric vehicles after April 18, 2023, the US Treasury says in long-awaited guidance released today.
These guidelines were supposed to be released by the end of 2022, causing some confusion among potential 2023 EV buyers who were left wondering if their new car would qualify for the full tax credit. Here's what the IRS has to say.
Those who purchase an EV on or after April 18, 2023, can only claim the EV credit on their 2024 taxes if their vehicle's battery contains at least 40% of its minerals sourced from North America or a free trade partner (like Japan), and 50% of battery components sourced from North America.
"A vehicle meeting neither requirement will not be eligible for a credit, a vehicle meeting only one requirement may be eligible for a $3,750 credit, and a vehicle meeting both requirements may be eligible for the full $7,500 credit," according to a Friday IRS update(Opens in a new window) (see Q6).
The IRS also confirmed all other terms currently in place still apply:
The vehicle must be assembled in North America.
It must be priced under $55,000 for a sedan and $80,000 for an SUV.
Buyer income must be under certain caps: $150,000 for individuals, $225,000 for head of household, and $300,000 for married or jointly filing.
Of all the requirements, the battery-sourcing additions are considered by automakers to be a main bottleneck for tax credit eligibility. Domestic assembly is also required, which rules out foreign automakers, such as Kia and Hyundai, that manufacture abroad. But the Biden administration backs this approach to encourage domestic manufacturing and move away from relying so much on China for materials.
Sen. Joe Manchin, a
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