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Why the new EVs credit may be harder to claim
The Inflation Reduction Act, which President Joe Biden signed in August, set various manufacturing requirements for new all-electric and plug-in hybrid vehicles to be able to qualify for the full $7,500 tax credit.
As of Aug. 17, for example, final assembly of the car had to take place in North America.
The final two requirements — which apply to the sourcing of car battery components and critical minerals — will kick in on April 18 and phase in over a few years, according to the Treasury Department.
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Lawmakers’ aim is to encourage carmakers to build batteries with domestic supply chains instead of relying on countries like China for essential parts.
In the short-term, though, it’s expected that the current list of cars that qualify for the $7,500 credit will fall in number, at least until manufacturers are able to meet the new battery rules.
The IRS will update that list of qualifying EVs on April 17. At that time, the cars that currently qualify for a tax break may be associated with a smaller tax credit or none at all, perhaps just temporarily.
$4,000 credit for used EVs has fewer conditions
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The Inflation Reduction Act also created a tax credit for consumers who buy used electric or fuel-cell vehicles.
The tax break for used cars, which took effect in 2023, is worth $4,000 or 30% of the sale price, whichever is less.
This “previously owned clean vehicles credit” doesn’t carry any of the manufacturing rules tied to new EVs — amounting to a potential workaround for consumers who are in the market for an electric vehicle and want to maximize their tax savings.
“If the new vehicle you want isn’t eligible [for the $7,500 credit], you might be able to save some…
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