The new 2023 rules for getting EV tax credits under the Inflation Reduction Act come into effect today, reducing the number of car models that qualify for the full federal tax credit. We’ll explain why that is, what the new rules are and how you can make sure your clean vehicle is eligible for the full tax credit of $7,500.

Any car you take delivery of on or after today, April 18th, 2023, will have to meet the critical battery component and mineral requirements to apply for the full $7,500. If your vehicle meets only one of the two – battery or mineral – you can only apply for half the amount; if your new car meets neither the battery nor the mineral component requirement, you’ll lose out on the tax credit altogether. 

Critical mineral requirement
40% of the critical minerals in your EV battery, like nickel, manganese, and cobalt, must be domestic sources or a free trade country, or recycled in North America – the % will go up by 10% each year until 80% in 2027.

Battery component requirement
50% of your EV battery must be made in North America – the % will go up by 10% each year until 100% in 2029.

Since most batteries are currently made in Asia, it’s no wonder the number of car models eligible for the full tax credit has gone down with the introduction of these new quotas. In the longer run, though, the government’s goals are noble: drive up the domestic manufacturing of EV batteries, thereby reducing our dependence of China in the process.

Secretary of the Treasury Janet L. Yellen said , “Treasury is taking an important step that will help consumers save up to $7,500 on a new clean vehicle and hundreds of dollars per year on gas, while creating American manufacturing jobs and strengthening our energy and national security.”

The long view needs to be taken here. For now, our options when choosing an EV are reduced somewhat, which is a pain for anyone who’s seriously considering going electric. But by ‘forcing’ car manufacturers to start producing batteries on American soil and to bolster supply chains with the right partners, they get the chance to play catch up and add the highly coveted ‘made in America’ label to their products.

Until then, if you are in the market for buying a new EV , make sure you keep an eye on the rulebook and before you hand over your cash, check the official government website to find out if the EV you’re interested in buying meets the new requirements.

Did you know?
From 2024, you will be able to convert the tax credit into a discount at the time of purchase. You will no longer have to wait until you’ve filed your taxes to get your money.