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US Department of the Treasury makes significant last-minute change to vehicle tax credit rules: 'Fair and logical'

"We would upgrade in an instant."

"We would upgrade in an instant."

Photo Credit: iStock

It looks like transport electrification is here to stay. Thanks to contributions from the Biden administration's Inflation Reduction Act (IRA), there are significant tax breaks and credits available that can make the purchase of an electric vehicle more realistic for many. 

Electrek reported that the United States Department of the Treasury and Internal Revenue Service (IRS) have made improvements to tax credit rules that allow for more EVs to become eligible. 

Reforms initiated in 2023 eliminate the 200,000 vehicles-per-manufacturer limit. However, tax breaks for potential EV owners who earn much more than the national average have been reduced. The final rules for the program also prioritized North American manufacturing, including the battery materials and components used to produce EVs in the U.S. market. 

As sourcing battery materials domestically has been a challenge for automakers, the U.S. Treasury Department and IRS gave relief by easing requirements for sourcing graphite, electrolyte salts, binders, and other components until 2027

EVs are becoming increasingly popular for a few reasons. They offer a cleaner, more sustainable way to get around compared to traditional gas-powered cars. One of the most significant benefits of EVs is that they produce no tailpipe pollution, which helps improve air quality and reduce asthma-related health issues.

Plus, with advancements in technology, EVs have been steadily becoming more affordable and practical. For instance, the rise in popularity of electric cars has led to innovations like the new "transformer" District EV by Land, which can function as an e-bike, moped, or motorcycle, giving you versatile options for different types of travel.

The four-year grace period on component materials allows the requirements to become solidified while giving room to battery suppliers and automotive companies to transition to North America for material sources. 

"This seems fair and logical. Auto companies need time to procure sources for batteries because China has been way ahead in this department," said one Electrek commenter.

"We have two model 3s. We would upgrade in an instant if the long range or standard range became eligible for [a] tax credit," shared another, referring to the popular Tesla model and its variants.

While Electrek reported in May that 22 EVs out of the 104 for sale in the U.S. are eligible for the tax credit, the new rules have given incentive for more EVs to meet the criteria in the coming years. 

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