Full $7,500 Electric Vehicle Tax Credit: How Americans Benefit Through IRA Loophole

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In mid-April 2023, new regulations governing which electric vehicles would be eligible for the Biden Administration’s $7,500 Electric Tax Vehicle Tax Credit come into effect, substantially restricting the ability of many people to do so. 

For those who want an EV but do not qualify for the $7,500 tax credit, a workaround is available if they choose to rent rather than purchase.

Electric Vehicle Tax Credit
Eelectric vehicles are charging at a charging station in Monterey Park, California, on April 12, 2023. – US President Joe Biden’s administration unveiled new proposed auto emissions rules, aiming to accelerate the electric vehicle transition with a target of two-thirds of the new US car market by 2032. (Photo by Frederic J. BROWN / AFP) (Photo by FREDERIC J. BROWN/AFP via Getty Images)

Full $7500 Electric Vehicle Tax Credit: IRA Loophole Allows Americans to Benefit From Loophole

The restricted component sourcing guidelines outlined in the IRA must be followed for consumers to receive the full $7,500 electric tax credit. Only ten automobiles are on the list, and three aren’t even available. Most EVs, as long as they are leased, receive the entire amount thanks to a legal exception.

The entire electric vehicle tax credit is given to leased automobiles since, per the IRA, they are considered commercial vehicles. According to Bloomberg, international automakers reportedly made a strong case for the loophole. It gives them a means of luring clients even if they have to switch their emphasis from buying to leasing.

That means no matter where the EV is built, where the battery components originate from, or who the customer is, they may get the full $7,500 electric vehicle tax credit if they lease rather than buy one unit. 

Autoevolution noted that any electric car is eligible for the electric vehicle tax credit if it is rented rather than purchased since the new laws do not define the same limitations for leased vehicles, all of which are deemed “commercial vehicles.”

READ ALSO: Elon Musk’s Net Worth Down by $12.6B After Starship Explosion

Why EV Credit May Be Harder to Claim

For new all-electric and plug-in hybrid cars to be eligible for the full $7,500 electric vehicle tax credit, CNBC News explained that the Inflation Reduction Act, which President Joe Biden signed in August, specified several production conditions.

For instance, the car’s final assembly has to happen in North America as of August 17.

The Treasury Department reports that the last two rules, which relate to the source of essential minerals and auto battery parts, will go into effect on April 18 and phase in over a number of years.

Lawmakers aim to get automakers to produce batteries using domestic supply chains rather than depending on nations like China for crucial components.

READ ALSO: Things That Affect Your Car Insurance

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