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Senate reaches a deal regarding EV tax credits sought by Tesla, Toyota

A bid deal between senators Chuck Schumer and Joe Manchin includes a very popular consumer tax credit extension regarding the purchase of electric vehicles. This is a massive benefit to EV giants like General Motors, Tesla, and Toyota. This credit is included in a much larger legislative package that talks a lot about President Joe Biden’s domestic agenda, as well as about $369 million on climate and energy spending.

The Deal

This deal allows carmakers to continue offering up to a $7,500 tax credit for the purchase of a new electric vehicle. However, some stipulations need to be met; the car must be built with minerals that are extracted or processed in a country the United States has a free trade agreement with, and the battery must include mostly components that were manufactured or assembled in North America. Consumers who do meet these requirements for new “clean car” purchases at registered dealers would be eligible for discounts of equal value to the credit at the point of sale, and $4,000 for used clean cars, both only on first-time purchases.

This proposed legislation also removes the previous requirements which stated that qualified vehicles need to have solely plug-in electric drive motors as well as the 200,000-vehicle per manufacturer cap that automakers have been concerned about as several of the big automakers already exceeded that threshold.

More Details

The deal also includes a cap on the suggested retail price of eligible vehicles of $55,000 for new cars and $80,000 for pickups and SUVs. Credits would be capped to an income level of $150,000 for a single filing taxpayer and $300,000 for joint filers for new vehicles; and capped at $75,000 and $150,000 respectively for used cars.

The policies “will ensure that America builds the core technologies of the 21st Century here at home, and it will allow us to win the global clean transportation race,” the Zero Emission Transportation Association, said in a statement.

Wrap Up

This deal could prove essential to the EV market in the future because now automakers can offer more tax credits to customers buying their cars, which could be a massive step in the right direction to getting more “clean cars” out on the road. If you ever need any help regarding this tax credit, contact a trusted financial advisor for assistance.

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