New Senate Deal Would Expand EV Tax Credits
Not too long ago, reports indicated that the proposal to increase the federal tax credit for electric vehicles from $7,500 to $12,500 was dead. One person, Democratic Senator Joe Manchin, was one of the more outspoken voices against President Joe Biden's proposal. Surprisingly, Reuters reports that Manchin and Senate Majority Leader Chuck Schumer have struck a deal and come out with a new proposal to extend the available consumer tax credit.
Expansion To Federal EV Tax Credit
The proposal has a lot of components, but there are quite a few things that will affect shoppers. The federal tax credit for new electrified vehicles with battery packs that are large enough will continue to be $7,500, but there's a new tax credit for used EVs for $4,000. There are a few conditions that have to be met in order for vehicles to be eligible for the tax credit, though.
The majority of critical minerals that are used to manufacture the battery must come from a country that has a free trade agreement with the U.S. or be recycled in North America. The figure starts at least 40 percent before January 1, 2024 and increases 10 percent every year before reaching 80 percent in 2027. Then, there are the requirements for the battery components, which must be constructed or assembled in North America. The rate for this requirement also increases, as it starts at 50 percent in 2024 and goes up to 100 percent in 2029, increasing 10 percent every year.
Another big change is the addition of a price cap for electrified vehicles. New cars will have a price cap of $55,000, while vans, SUVs, and trucks are capped at $80,000. There's now an income cap for shoppers, as single individuals can't make more than $150,000 and couples max out at $300,000.
Say Goodbye To The Cap
In a move that will make automakers happy, the proposed deal would remove the 200,000-vehicle cap on sales. That means consumers shopping for an affordable vehicle from General Motors, Tesla, and Toyota will be able to take advantage of the tax credit.
The new proposal is filed under the Inflation Reduction Act of 2022. The proposal will also introduce credits and loans for automakers to take advantage of to build EV manufacturing plants. The government is prepared to parcel out $20 billion in loans and $30 billion for additional production tax credits "to accelerate U.S. manufacturing of solar panels, wind turbines, batteries, and critical minerals processing," claims Reuters.
The Senate is expected to vote on the proposed legislation next week. After that, it will head to the House of Representatives. While the proposal isn't as attractive as President Joe Biden's plan to increase the federal tax credit to $12,500, it does bring some meaningful changes to the current system.
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