New US Legislation To Extend Tax Credit On Electric Vehicles

The US senate recently passed a bill that included tax benefits on electric vehicles. The bill calls for the extension of the $7,500 tax credit currently offered subject to vehicles meeting certain criteria. Presently the $7,500 tax credit was capped at the first 2 lakh units sold by the company with the new criteria putting into place a price cap as well as manufacturing restrictions. The new legislation will also introduce tax credits up to $4,000 on used electric vehicle purchases.

As per reports, the new legislation will cap the eligibility criteria based on the cost of the vehicle with SUVs and trucks capped at $80,000 and for cars at $55,000. The production number cap currently in place will be dropped.

Additionally, the vehicle’s battery should source critical components either from domestic companies or from the U.S’ free trade partners with the final assembly of the models also to take place in the US. Reports state that at least 40% of the battery components will have to be sourced either domestically or through free-trade partners by 2024 for the tax credit to be eligible on a car. The US is targeting manufacturing complete battery packs domestically by 2029.

New legislation says that manufacturers will have to source 40% of battery materials locally or through free-trade partners to avail of credit from 2024.

Additionally, some reports state that the tax credit will also be subject to the buyer’s income with it only available to people making under $150,000 a year. Another change over the current tax credit system is that the new legislation will allow buyers to apply for the tax credit at the time of vehicle purchase at not at the time of filing taxes.

On the used car front the $4,000 benefits are also set to be subject to caveats including the vehicle costing under $25,000 and an income cap of $75,000 per year for an individual.

The new legislation is currently set to be tabled before the House of Representatives in the US following which it will be presented to the U.S President. The new rules if passed are expected to come into force from 2023.

Source: CNBC, Electrek