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Almost None of Today's Electric Vehicles Qualify For New Tax Credit

Almost None of Today's Electric Vehicles Qualify For New Tax Credit

Almost none of the electric vehicles on the market today are eligible for the new tax credit just approved by the United States Congress.

Within the newly passed Inflation Reduction Act of 2022, there lies a provision to expand the tax credit offered to electric vehicle (EV) owners. However, as one recent report points out, the "rules are written in such a way as to effectively disqualify every EV that's currently on the market today."

This is due to the fact that the vast majority -- over 75%, in fact -- of today's electric vehicle models run on lithium-ion batteries that are manufactured in China. 

In order to secure the Senate's vote, Capitol Hill Democrats had to agree to the provision that the new EV tax credit would only apply to vehicles with batteries made in North America.

Officially, the language within the Inflation Reduction Act states that taxpayers must own automobiles with batteries containing "at least 40% of materials sourced from North America or a U.S. trading parter by 2024" to qualify for the $7,500 tax break.

Per the aforementioned article:

Batteries that contain minerals that "were extracted, processed, or recycled by a foreign entity of concern," which is defined as a state sponsoring terrorism or countries blocked by the Treasury Department's Office of Foreign Assets Control, would be ineligible for the credit. China is listed as a "foreign entity of concern" by the federal government.

In a post on Friday, August 5, the Alliance For Automotive Innovation's John Bozzella explained that of the 72 EV vehicle models for sale in the U.S. today, 70% are ineligible for the new tax credit. 

Bozzella shared:

...Americans who would otherwise receive the credit today (say, the family test driving a car this weekend and on the fence about whether to make the switch to an EV) will no longer be able to take advantage of this financial incentive to purchase an EV. The $7500 credit might exist on paper, but no vehicles will qualify for this purchase incentive over the next few years. That's going to be a major setback to our collective target of 40-50 percent electric vehicle sales by 2030.

At this time, it is unclear if vehicle manufacturers intend to alter their supply chain processes to allow more consumers to take advantage of this expanded EV tax credit over the coming years. 

Do you currently drive an electric vehicle?

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Rebekah Barton

Rebekah Barton

Rebekah's search engine optimization career began completely by accident as a college student. Over the course of her career so far, she has "grown up" with the SEO industry, from writing content while juggling classes to managing her own teams of writers and overseeing SEO strategy in subsequent roles. She is excited to bring her passion for high-quality content to CountingWorks, Inc.

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