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Changes Ahead for Electric Vehicle Tax Credits
It appears that the affordability of certain electric vehicles (EVs) and plug-in hybrids may decline starting next year. Recent reports indicate that the incoming Trump administration is planning to eliminate the IRS clean vehicle tax credit.
The Evolution of the Clean Vehicle Tax Credit
This tax incentive underwent significant modifications as part of President Joe Biden’s landmark climate initiative. Previously, the amount of tax credit available for a plug-in vehicle was determined by its battery size, allowing for credits up to $7,500. However, beginning in 2023, new regulations were introduced that mandated a minimum level of domestic manufacturing to qualify for these credits. Additionally, price and income limits were established in response to concerns that these incentives primarily benefited wealthier individuals.
Impact on Eligibility and Leasing Loopholes
As a result of these changes, many vehicles are no longer eligible for immediate rebates at purchase time. This shift has been particularly pronounced following stricter guidelines from the US Treasury Department regarding components sourced from China. Interestingly, there remains a loophole: leased electric vehicles are not subject to these new eligibility requirements.
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