The battery assembly percentage significantly impacts the tax credit amount for electric vehicles (EVs). To qualify for the full tax credit, EVs must meet specific requirements regarding both critical minerals and battery components. Here’s how the assembly percentage affects the credit:
Critical Minerals and Battery Components Tax Credits
- Critical Minerals Requirement: To receive the $3,750 critical minerals tax credit, the vehicle’s battery must contain a threshold percentage (in value) of critical minerals that are extracted or processed in the U.S. or a free-trade agreement partner, or recycled in North America.
- Battery Components Requirement: For the $3,750 battery components portion of the credit, the percentage of the battery’s components that must be manufactured or assembled in North America varies by year:
- 2023: 50%
- 2024 and 2025: 60%
- 2026: 70%
- 2027: 80%
- 2028: 90%
- 2029 and later: 100%
If an EV meets these requirements, it can qualify for the maximum tax credit. If not, the credit will be reduced accordingly.
Impact on Tax Credit Amount
- Full Tax Credit: The total possible credit for new clean vehicles in 2023 and later includes a base credit of $2,500, plus $500 for meeting the critical minerals requirement and another $3,750 for meeting the battery component requirements, totaling up to $6,750. However, if the vehicle fails to meet either the critical minerals or battery components requirements, the applicable portion of the credit is forfeited.
- Partial Credit: Vehicles that do not meet all requirements may still qualify for a reduced credit. For instance, if a vehicle meets the critical minerals requirement but not the battery component requirement, it would only be eligible for the $500 critical minerals portion plus the base amount.
Thus, the battery assembly percentage directly affects whether an EV qualifies for the full tax credit, with higher assembly percentages required in future years to maintain eligibility.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-battery-assembly-percentage-impact-the-tax-credit-amount/
