The $7,500 clean vehicle tax credit consists of two equal parts of $3,750 each: one part based on critical minerals requirements and the other on battery components requirements. To qualify for the full $7,500 credit, a vehicle must meet both sets of criteria.
Critical Minerals Requirements for the Tax Credit
- The battery of the vehicle must contain a certain percentage of critical minerals that are:
- Extracted or processed in the United States, or
- Extracted or processed in a country with which the U.S. has a free trade agreement, or
- Recycled in North America.
- This threshold percentage increases each year starting in 2023 as follows:
- 2023: 40%
- 2024: 50%
- 2025: 60%
- 2026: 70%
- 2027 and after: 80%
- Additionally, from 2025 onward, none of the applicable critical minerals in the vehicle’s battery may come from a “foreign entity of concern,” reflecting stricter sourcing rules.
Important Notes
- These requirements apply to vehicles placed in service on or after April 18, 2023.
- Eligibility is based on the sourcing rules as of the date the taxpayer takes delivery of the vehicle.
- Meeting the critical mineral requirement makes the vehicle eligible for up to $3,750 of the credit, and meeting both critical mineral and battery component requirements allows for the full $7,500 credit.
In summary, the critical minerals portion of the tax credit depends on the battery containing a gradually increasing percentage of minerals sourced or recycled under specific geographic criteria, which is crucial for qualifying for the full $7,500 new clean vehicle tax credit.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-are-the-critical-minerals-requirements-for-the-7500-tax-credit/
