The United States Department of Treasury gave electric vehicle buyers and international automakers a new year’s gift by expanding the number of electric vehicles (EVs) and plug-in hybrids (PHEVs) that qualify for a federal tax credit of about $7,500. The new guidelines include automobiles not made in North America as long as consumers lease or purchase used models instead of brand-new ones.
The decision regarding leased vehicles does not relieve the heightened limitations placed on tax incentives for people who purchase brand-new EVs and PHEVs in 2023. The agency wanted to increase North America’s production, relocate battery distribution networks in the United States as well as in nations with whom the United States has free trade deals, and promote sales of cheap electric vehicles to middle-class consumers. Additionally, the law removed the auto manufacturer sales limit on Jan. 1, making GM’s and Tesla’s cars once more eligible. An up-to-date list of eligible automakers and models is available on the IRS website.
Three types of electric vehicle credits are included in a revamped federal incentive scheme that was made law in August last year and went into effect on Jan. 1, 2023. The first type maintains the previous credit of $7,500 for people purchasing new EVs and PHEVs but still imposes additional cost and earnings restrictions on the vehicles. In the near future, it will also introduce guidelines for the supply of auto car batteries and other components. In addition, since August, it has been mandated for the qualifying vehicles to be assembled within North America.
The second type is a new $4,000 credit for buyers of used electric vehicles, while the third type of credit is for “commercial” EV purchases made by companies. This type pays not more than $7,500 and $40,000 for light trucks weighing less than 14,000 lbs and bigger trucks respectively. It has neither an origin nor a price or other limitations.
Additionally, the Department of Treasury’s guideline, which was published late in December, permits this type of tax credit to also apply to consumer-leased cars. Consequently, the majority of PHEVs and FCEVs now on the market, including European or Asian-made vehicles, can be considered. The leasing firm, which owns the car, receives the tax credit, although it may be transferred to the customer by way of decreased lease settlements.
The newly introduced federal regulations are unaffected by state and local subsidies already in place for electric vehicle buyers.
After Jan. 1, 2023, a 30% tax incentive on the selling price of no more than $4,000 became available for purchased used electric cars as well as plug-in hybrid cars. Although less than that for new vehicles, the credit still comes with limits. The IRS has published a list of automobiles that meet the requirements and the credit guidelines.
These expanded conditions for accessing federal tax credits give all electric vehicle manufacturers, including Workhorse Group Inc. (NASDAQ: WKHS), a bigger chance to make inroads into the market as electrification gathers pace around North American and the world.
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