The Inflation Reduction Act includes a tax credit for electric vehicles but most electric vehicles won't qualify

Tesla electric cars charge at the Tesla dealership in Salt Lake City on June 4, 2021. A majority of electric vehicles won’t qualify for the credit included in the Inflation Reduction Act.

Tesla electric cars charge at the Tesla dealership in Salt Lake City on June 4, 2021. A majority of electric vehicles won’t qualify for the credit included in the Inflation Reduction Act. (Jeffrey D. Allred, Deseret News)



Estimated read time: 2-3 minutes

SALT LAKE CITY — On paper, the Inflation Reduction Act, which passed the Senate on Sunday, includes a $7,500 tax credit for those who purchase an electric vehicle. But a majority of electric vehicles won't qualify for the credit.

To qualify for the tax credit, the vehicle must contain a battery with 40% of metals mined in North America, according to The Associated Press. The metal requirement will increase to 80% by 2027.

The Alliance of Automotive Innovation, told AP that they estimate under the requirements, 50 out of the 72 hydrogen or plug-in models sold in the U.S. wouldn't meet the qualifications.

"The $7,500 credit might exist on paper," John Bozzella, CEO of the Alliance of Automotive Innovation, according to AP, "but no vehicles will qualify for this purchase over the next few years."

If the metal requirements aren't met, buyers can be eligible for half of the credit, $3,750.

The United States produces about 2% of the world's supply of lithium, which is needed for batteries, and has about 4% of lithium reserves, according to PBS News.

Currently, China dominates the supply chain for lithium batteries with most of the world's lithium supply coming from South America and Australia.

Another rule according to AP requires half of the batteries' value to have been assembled in North America with the percentage increasing each year until 2029 when 100% of the battery must be assembled in North America.

Additionally, a rule requiring the vehicle itself to be manufactured in North America would excluded electric vehicles made overseas entirely.

Under the bill, there is also a $4,000 tax credit for buyers of used electric vehicles.

The tax credit can only be used by couples with incomes of $300,000 or less or single people with an income of $150,000 or less. Trucks or SUVs priced above $80,000 or cars above $55,000 will not be eligible.

Sen. Debbie Stabenow, D-Mich., told reporters on Monday that Sen. Joe Manchin, D-W. Va., whose vote was critical to moving the bill forward, opposed the tax credits and the restrictions were a compromise.

Related stories

Most recent U.S. stories

Related topics

U.S.Politics
Carlene Coombs

    SIGN UP FOR THE KSL.COM NEWSLETTER

    Catch up on the top news and features from KSL.com, sent weekly.
    By subscribing, you acknowledge and agree to KSL.com's Terms of Use and Privacy Policy.

    KSL Weather Forecast