The critical minerals requirement significantly affects eligibility for the tax credit under the Inflation Reduction Act (IRA). Here’s how it impacts eligibility:
- Eligibility Requirement: To qualify for a $3,750 credit, a portion of the vehicle’s battery must contain critical minerals that meet specific sourcing criteria. This portion must be:
- Extracted or Processed: The applicable percentage of the value of the critical minerals must be extracted or processed in the United States or a country with which the U.S. has a free trade agreement.
- Recycled in North America: Alternatively, the minerals can be recycled in North America.
- Percentage Requirements Over Time:
- 2023: 40% of the critical minerals’ value must meet the requirement.
- 2024: This percentage increases to 50%.
- 2025: It rises to 60%.
- 2026: The requirement is 70%.
- 2027 and Beyond: The final target is 80%.
- Maximum Credit: The full $7,500 credit is comprised of two parts:
- $3,750 for meeting critical mineral requirements, and
- $3,750 for meeting battery components requirements. Vehicles must meet both sets of requirements to qualify for the full credit.
- Effective Date: These requirements apply to new clean vehicles placed in service on or after April 18, 2023, regardless of when they were ordered or purchased.
In summary, the critical minerals requirement is a key factor in determining the eligibility for a significant portion of the tax credit for new clean vehicles under the IRA.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-critical-minerals-requirement-affect-eligibility-for-the-tax-credit/
