If a vehicle does not meet the critical mineral requirement under the new clean vehicle credit rules established by the Inflation Reduction Act, it will not qualify for the portion of the tax credit tied to that requirement. Specifically, meeting the critical mineral requirement is necessary to be eligible for up to $3,750 of the total $7,500 credit available for clean vehicles.
Here’s a detailed explanation:
- The critical mineral requirement mandates that a certain percentage of the value of critical minerals in the vehicle’s battery must be extracted, processed, or recycled in the United States or in countries with which the U.S. has free trade agreements, or be recycled in North America. This percentage increases each year: 40% in 2023, rising to 80% by 2027 and beyond.
- Vehicles placed in service on or after April 18, 2023, must meet this requirement to qualify for the $3,750 credit portion related to critical minerals, regardless of when the vehicle was ordered or purchased.
- If a vehicle fails to meet the critical mineral percentage requirement for that year, it simply does not qualify for this half of the credit. The total clean vehicle credit can be split into two $3,750 parts: one for the critical mineral requirement and one for the battery component requirement. Not meeting one does not necessarily disqualify the vehicle from the other credit portion, but it reduces the maximum credit the buyer can claim.
- Therefore, a vehicle not meeting the critical mineral requirement can still qualify for the battery component portion of the credit if it meets that respective criterion, but the overall credit would be less than the full $7,500 available.
In summary, if a vehicle does not meet the critical mineral requirement, the buyer will lose eligibility for up to $3,750 of the clean vehicle tax credit related to critical minerals, resulting in a lower total credit amount or potentially no credit if the battery component requirement is also not met.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/what-happens-if-a-vehicle-does-not-meet-the-critical-mineral-requirement/
