The federal tax incentives for electric cars in the Inflation Reduction Act will benefit many, but impose significant new restrictions.
. Battery materials that originally came from China become eligible for the new federal tax incentives if they are reprocessed in North America and used to produce new batteries for electric cars built in North America. The problem is there really aren’t that many batteries available for recycling yet, and there won’t be for years. As Elon Musk recently stated, it might be 12 or even 15+ years before an EV’s battery is ready for its next life.
“Buyers must still pay the price they negotiate for the car . They can then claim the credit the next time they file their taxes. The credit lowers your tax liability. If your tax bill is lower than the credit, you’ll receive the balance as a refund. However, you can’t roll that credit or any remaining balance into the next tax year.”
However, the legislation still hasn’t made it through the House of Representatives and been signed by Joe Biden, so we’ll have to wait for confirmation on all of this until that’s done and the experts decipher the final legalese. There’s more. Nowhere does the law clarify how all of this applies to Tesla and other companies that sell directly to consumers without a dealer involved. We know there is a new tax credit for used electric cars, but it specifically requires the sale must be made by a licensed dealer. Tesla sells a lot of used cars. Does the credit for used cars apply to Tesla? Inquiring minds want to know.
Please note: This article was written on Wednesday, August 10. The IRA has not yet passed the House and has not been signed into law by the president. Any number of changes could take place between now and whenever a final version of the legislation is enacted. If there are errors or omissions in this article, it is probably because accurate information is currently unavailable. When we know more, you’ll know more.
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