Effective immediately, consumers in the market for an electric vehicle (EV) may have fewer options to obtain a tax break, according to recent updates to U.S. tax law. As of April 2023, the Treasury Department has restricted the list of EVs eligible for a $7,500 consumer tax credit, which was designed to incentivize consumers to switch to low-emissions vehicles.
The updated legislation now stipulates that only EVs which are U.S.-built and use battery components from the U.S. or its trading partners qualify for the tax break.
This change is part of the Biden administration’s broad effort to encourage Americans to shift towards using electric cars, in turn reducing carbon emissions and air pollution. Under the updated rules, only 10 electric and plug-in hybrid vehicles are eligible for the full $7,500 tax credit – a reduction of half the number of eligible vehicles that were previously available. Vehicles still eligible for the full credit include Tesla’s Model Y and Model 3, as well as the Chevrolet Bolt.
If anyone doubts the impact of Biden’s rule change, the assessment by Hyundai, a major EV foreign competitor, illustrates its effect. Hyundai says Biden’s new EV tax credit rules are an “astronomical” blow to business.
Hyundai says Biden’s new EV tax credit rules deal ‘astronomical’ blow to business https://t.co/0TQlVhDX09
— CNBC (@CNBC) October 19, 2022
While many automakers have begun to transition to producing EVs, some vehicles may no longer qualify for the full credit due to their reliance on foreign-made battery components. For example, the Ford Mustang Mach-E and several other EVs only qualify for a $3,750 tax credit due to their use of batteries made outside of the United States. Nine EV models, such as those made by Nissan, Volkswagen, and Genesis (Hyundai’s luxury division), are no longer eligible for the tax credit.
This limitation of the tax credit for EVs could potentially limit their affordability and consequently slow down the transition towards more sustainable modes of transportation. It is important for consumers to stay up to date on tax credit eligibility criteria to make informed decisions when purchasing an EV. The Department of Energy’s fueleconomy.gov website provides a comprehensive list of eligible EVs under the new rules.
