Changes to Electric Vehicle Tax Benefits Impact Popular Models

Many electric cars in the United States no longer qualify for special tax credits, including those offering up to $7,500. This happened because of new rules about where their batteries come from. The rules were decided by the U.S. government and took effect on Monday. Cars affected include the Nissan Leaf, Tesla Cybertruck All-Wheel Drive, and Chevrolet Blazer EV, as per the U.S. Treasury.

The U.S. Treasury made new rules in December about where the batteries for electric cars should be sourced. They want to make sure the supply chain for making electric cars doesn't rely too much on China. These rules started applying on Monday.

With these changes, the number of electric car models that qualify for special U.S. tax credits dropped from 43 to 19. It's worth mentioning that these figures include different versions of the same type of car. The Treasury mentioned that some carmakers haven't given information about which cars qualify, so the list could still change.

According to the new rules, if you buy an electric car, you can get a tax credit of up to $7,500 at the dealership where you buy it. But there are limits on the car's price and the buyer's income to get this benefit.

Now, some popular electric cars that no longer qualify for tax credits are the Volkswagen ID.4, Tesla Model 3 Rear Wheel Drive, BMW X5 xDrive50e, Audi Q5 PHEV 55, Cadillac Lyriq, and Ford E-Transit. The list of cars affected might change as more information comes in from carmakers.

Volkswagen is hopeful that its ID.4 cars from the 2023 model year and all ID.4s from 2024 will still qualify under these new rules. But BMW, Nissan, and Tesla haven't shared their thoughts on this yet.

The Treasury said that "car companies are changing how they get parts to make sure people can still get these new clean vehicle benefits. They are working with others and bringing jobs and investments back to the United States."

This change in who gets tax credits for electric cars comes from a law passed in 2022 called the Inflation Reduction Act. This law says that for a car to get any tax credits, it must be assembled in North America. This led to almost 70% of the electric car models losing their eligibility at that time.

Tesla had already shared in December that its Model 3 Rear-Wheel Drive and Long Range models would lose these tax credits starting January 1. But the Model 3 Performance will still get the $7,500 credit. These changes will likely shake things up in the electric car market in the U.S. in the next few months.

Also Read: New EV Tax Credit 2023: List of Electric Vehicle Models Eligible for Up to $7,500 in New Tax Credits