The percentage of North American battery components affects eligibility for a tax credit under the Inflation Reduction Act as follows:
- Eligibility Requirement: To qualify for a portion of the tax credit, specifically up to $3,750, a certain percentage of the vehicle’s battery components must be manufactured or assembled in North America.
- Variable Percentage Requirements:
- 2023: The applicable percentage is 50%.
- 2024 and 2025: The applicable percentage is 60%.
- 2026: The applicable percentage increases to 70%.
- 2027: The percentage required is 80%.
- 2028: The applicable percentage is 90%.
- After 2028: From 2029 onwards, all battery components must be manufactured or assembled in North America, i.e., 100%.
- Impact on Eligibility:
- If a vehicle meets the specific percentage requirement for its year of service, it qualifies for the relevant portion of the tax credit.
- Failure to meet these requirements results in ineligibility for that portion of the credit.
Additional Considerations
Besides the North American content percentage, vehicles must also comply with other regulations, such as not using components from “foreign entities of concern.” This ensures that the tax credit incentivizes not only North American manufacturing but also aligns with broader policy goals.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-percentage-of-north-american-battery-components-affect-eligibility/
