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Tax credit rules for next year not entirely clear

Sarah White Sarah White on March 27, 2023

Image source: PC Mag

Tax credit: Several electric vehicle models from General Motors and Tesla could qualify for tax incentives in 2023, which is just a few days away.

Some EVs weren’t qualified for tax credits worth $7,500 this year.

Although the change is positive, the eligibility can only be valid for a limited time.

The August Inflation Reduction Act’s restrictions are to blame for the continued eligibility.

This Monday, the Treasury Department announced that the Act’s limitations on newly generated tax credits would not take effect right away.

As a result, during the first few months of 2023, the rules will be temporarily more lenient and permit higher tax credits on more EVs.

The rules

The restrictions on the new tax credits have been delayed until at least March 2023, according to the US Treasury Department.

The new restrictions apply to both the manufacturing location of the battery and the places where its minerals were obtained.

It also announced proposed regulations that would carry out the requirements.

The law specifies that the tax credit reductions will begin as soon as the “proposed guidance” is issued.

Vehicles can be eligible for larger tax credits after three months have passed.

For instance, General Motors said that its electric vehicles will only be eligible for a $3,750 tax incentive if the full restrictions are in place.

For two to three years, the company’s automobiles won’t be qualified for the $7,500 tax credit.

Read also: Electric vehicles enjoy successful year

Downside

Despite the buying possibilities they would present in early 2023, the restrictions have the drawback of making the regulations unclear.

Chris Harto, a senior policy analyst at Consumer Reports, stated that he prefers more transparency over less.

“It seems like things just seem to get more confusing each time they say something,” said Harto.

To encourage manufacturers to produce their electric vehicles (and their parts) in the US or other countries with which they have trade relations, tax laws have been implemented in place.

Additionally, they ensure that wealthy Americans who purchase luxury vehicles do not receive tax credits.

Customers will surely profit from the most recent announcement because it temporarily boosts the amount of accessible tax credit money.

Qualifications

One of the many ambiguous parts of the Act is the tilted tax credit for early 2023.

According to updated EV tax credit standards, the Chevrolet Bolt EV and EUV are now qualified for tax credits for the next year.

They were previously ineligible despite the fact that they were built in North America.

The 200,000 electric vehicle sales cap for any firm under the previous tax credit limitations was exceeded by General Motors and Tesla.

The cap will be raised under the new regulations, which are a part of the Inflation Reduction Act.

Despite the adjustment, not all customers (or electric vehicles) will be qualified for credits.

For instance, in addition to the demand for North American output, there will be pricing restrictions.

The maximum sticker price for a car is $55,000, while the maximum price for an SUV is $80,000.

As a result, a majority of Tesla cars (including the Model X SUV, Model S sedan, and Model 3) won’t qualify for tax credits at their present prices.

Since it is produced in the US, the Mercedes EQS SUV now eligible for tax benefits would stop by 2023.

“It shuffles the deck as to who’s eligible, and then the deck will get shuffled again when this guidance comes out [in March],” said Chris Harto.

“And it makes a giant mess for consumers, and automakers, and dealers.”

Read also: Robots were influential to restaurants, but how far is the progress?

Buyers

Buyers cannot flip because of the restrictions on tax credits.

This implies that the final user must be the one who buys the vehicle.

Individuals are not qualified for the tax credit if they purchase a car with the purpose of reselling it later.

Additionally, the buyer’s income is subject to limitations.

The highest “modified adjusted gross income” for purchasers is $150,000 for individuals, $300,000 for married couples filing jointly, or $225,000 for the head of household.

High-end electric vehicle buyers won’t be able to get tax credits because of the restrictions.

The best thing buyers can do, in the opinion of Andrew Koblenz, vice president of the National Automobile Dealers Association, is find out if the vehicle they are considering purchasing is eligible for the tax credit.

Because some models are made in multiple factories, similar-looking SUVs purchased from the same dealer might not be eligible for the same level of credit.

“It’s a great time to be shopping,” said Koblenz.

“It’s great that there will be more vehicles eligible now, but you’ve still got to make sure the one you’re interested in is eligible.”

“You need to ask your dealer and your manufacturer that question, and you’ve got to make sure that you qualify too.”

Reference:

Tax credit confusion could create a rush for electric vehicles in early 2023

Electric vehicles enjoy successful year

Sarah White Sarah White on January 2, 2023

Image source: WBTW

Electric vehicles: Electric vehicle sales are higher than ever, and manufacturers outside Tesla are becoming more well-known.

Matt Degen, an editor at Cox Automotive, a website and company specializing in autos, aptly described the situation.

“It’s not your eyes tricking you,” highlighted Degen.

“For the longest time, the majority of the EVs on the road were Teslas, and they still get the lion’s share of sales.”

“But they’re now hardly the only game in town.”

The numbers

5.6% of the cars sold in 2021, according to Kelley Blue Book, were electric cars.

Two years ago, only 1.4% of electric vehicles were sold.

Norway was mentioned by BloombergNEF analyst Corey Cantor in reference to the success within the global markets.

The 5% market share represented a crucial turning point for greater acceptance.

Similar trends, according to BloombergNEF, also took place in markets like China and Europe.

Although plug-in hybrids were listed among the “electric vehicles” by Bloomberg, battery-powered cars still provide the majority.

A norm

5% may not seem like much, but it may be the beginning of something universal.

For instance, according to Cox Automotive, Hyundai’s entire US market share and market shares for electric vehicles are alike.

Both purchasing a Hyundai and an electric car don’t feel out of the ordinary.

But the main obstacle to buying an electric vehicle is the convenience.

“I think now the demand is definitely there,” said Cantor.

“It’s just been more a supply side of automakers not being able to ship enough.”

Read also: TikTok popularity makes US ban challenging

Supply & demand

The distribution of parts has been a challenge for the global auto industry since the beginning of 2022, which has hindered the manufacture of several vehicles.

The rapid success of a few electric vehicle models caught the manufacturers off guard.

For instance, the 2021 Mustang Mach-E was the first electric vehicle to compete with Tesla sales.

Since then, Ford has had trouble meeting the demand.

According to Darren Palmer, vice president of Ford’s electric vehicle projects, every Mach-Es produced by the company was manufactured according to a specific client order.

“We could sell it out at least two or three times over,” said Palmer.

“We have held back from launching more global markets because we’re completely sold out.”

The F-150 Lightning is a later model of Ford’s F-series pickup truck.

Additionally, the company is updating the Michigan factory where the Lightning is produced.

Variety

Additionally, there are now a wider variety of electric automobiles on the market.

Eleven electric vehicle models sold more than 1,000 units in 2019, according to Kelley Blue Book.

In 2022, there were 26 different models produced.

Hyundai and Kia released new models of the Hyundai Ioniq 5 and the Kia EV6 although they already sold electric cars.

Rivian also unveiled its R1S SUV and R1T pickup truck.

Meanwhile, General Motors saw a rise in sales after the Bolt EV and Bolt EUC were put on sale as a result of a battery fire recall.

Currently, the top manufacturers listed below are selling electric automobiles on the market:

  • Audi
  • BMW
  • Genesis
  • Mercedes
  • Volvo

“There’s different segments, there’s different price levels,” said Matt Degen.

“It’s not just having to spend $50,000 or $100,000 on an EV anymore.”

Tony Quiroga, the editor-in-chief of Car and Driver, claims that longer driving ranges and faster charging periods have enhanced the appeal of less expensive electric vehicles.

Additionally winning the 2022 Car and Driver Electric Vehicle of the Year award was the Hyundai Ioniq 5 ($41,000 starting Price).

“It’ll go from 10% to 80% on a fast charger in 18 minutes,” said Tony Quiroga. “Which is something that only the luxury brands were doing.”

Read also: Rent on the rise, but it’s moving at a steady pace

Inflation Reduction Act

Although there is a wider range of electric vehicles available, it is expected that when production problems are resolved, EV sales will climb.

However, there are still a great deal of open issues.

The rise in interest in electric vehicles earlier this year, according to Jessica Caldwell, an industry analyst for Edmunds.com, may have been driven by rising gas prices.

People may decide against purchasing electric vehicles in the upcoming year given the recent dramatic fall in gas prices.

Meanwhile, the consequences of the Inflation Reduction Act are still undetermined.

This year’s bill changed the circumstances under which electric vehicles can be eligible for consumer tax credits.

Furthermore, it establishes a limit on the car’s price based on the buyer’s income.

A few factors also favor domestic production of electric car batteries.

The question isn’t how many electric vehicles will be eligible, says Corey Cantor, but rather which ones.

“So, if a Tesla Model 3 and the Chevy Bolt, and the Tesla Model Y, and a Ford Mach-E and an F-150 Lightning all qualify, those are high volume vehicles,” said Cantor.

Due to their popularity and high sales, incentives can lead to an increase in the sale of electric vehicles.

Reference:

Electric vehicle sales hit a tipping point in 2022

Solar power provides double benefits

Karla Perry Karla Perry on December 19, 2022

Image source: Pew Research Center

Solar: Solar energy is one of the best ways for people to reduce their carbon footprint, but it has also significantly contributed to their capacity to save money.

A California utility regulator recently limited the usage of net metering.

As a result, it will at least 60% reduce the overall savings for houses from selling electricity to the grid.

Additionally, it affects the nation as a whole by changing the economic balance.

What solar brings

Josh Hurwitz, a Connecticut native, installed solar energy at his residence for three reasons:

  • Reduce his carbon footprint
  • Store electricity in a solar-powered battery in the event of a blackout
  • Save money

Hurwitz’s decision will enable him to pay for his system in six years and save tens of thousands of dollars over the following fifteen years.

Additionally, it shields him from increasing utility costs.

He is getting ready to build a Tesla battery to store the energy he produces because solar has so far behaved brilliantly.

“You have to make the money work,” said Hurwitz.

“You can have the best of intentions, but if the numbers don’t work, it doesn’t make sense to do it.”

Inflation Reduction Act

The Inflation Reduction Act, passed in August of this year, is helpful, according to Josh Hurwitz’s experience.

One advantage of prolonging and raising tax incentives is that it will encourage the usage of home-based solar power systems.

The law will hasten adoption growth by 26%, according to the Solar Energy Industry Association and Wood Mackenzie.

Also prolonged are the tax credits set to expire from 2024 until 2035.

The credits will cover 30% of the system’s cost.

A 30% credit is also available for batteries that can store recently generated electricity for later use.

Warren Leon, executive director of the Clean Energy States Alliance, made the following remarks to a bipartisan coalition of state government organizations:

“The main thing the law does is give the industry, and consumers, assurance that the credit will be there today, tomorrow, and for the next ten years.”

“Rooftop solar is still expensive enough to require some subsidies.”

Read also: Twitter employees laid off get early win over Musk

California solar market

Being certain about anything is the hardest part about solar.

Because of the frequent regulation changes, market experts have dubbed the market a “solar coaster.”

California removed a key incentive on December 15, the day after the new federal tax credits went into effect.

Any excess solar energy that homeowners’ systems create can be sold back to the grid.

As a result, the computations and California’s huge solar-power business were jumbled.

However, it will start working in April 2023.

According to Wood Mackenzie, the solar market will see a significant 39% fall in 2024 if the state and federal reforms are enacted simultaneously.

Even without considering the incentives offered by the Inflation Reduction Act, the consulting firm projects a 50% decrease due to the California policy shift.

According to Mackenzie, home solar is also coming off a historic quarter.

A little more than one-third of the total, or 1.57 GW, are located in California, a 43% increase from the previous year.

Growth

Tax credits can help potential switchers quickly recoup some of the up-front costs of going green.

Josh Hurwitz installed his solar system using the federal tax credit.

He is currently preparing to include a battery because it qualifies for tax advantages.

While waiting, some contractors offer packages that let customers pay the full amount upfront and gain credit toward future leases on the same equipment.

Rooftop solar systems can pay for themselves in as little as five years when tax incentives are paired with savings on electricity that homeowners don’t purchase from utilities.

Additionally, if the initial investment is reimbursed in 20 years, it can save more than $25,000.

Portfolio manager for the Van Eck Environmental Sustainability Fund, Veronica Zhang, stated:

“Will this growth have legs? Absolutely.”

“With utility rates going up, it’s a good time to move if you were thinking about it in the first place.”

Read also: Mortgage application shows positive movement amid falling interest rates

Energy storage

In some places, utilities must pay higher prices for any excess electricity produced by residential solar systems during peak output or used to recharge house batteries.

However, these states also have more generous subsidies and consumer-friendly policies.

Before this week, California had some of the laxest rules.

However, state utility regulators decided to let utilities pay less for any extra power they are required to purchase after power companies protested that the prices were too high and drove up the cost of electricity for other customers.

According to Wood Mackenzie, the details of California’s decision made it seem less demanding than the company had anticipated.

EnergySage estimates that California’s payback period without a battery will be ten years rather than six when the new laws take effect.

The company also expects savings to decline by 60% in the future years.

According to EnergySage, systems with batteries won’t be as severely affected because owners keep the majority of the extra power rather than selling it to the grid.

“The new [California rules] certainly elongate current payback periods for solar and solar-plus-storage, but not by as much as the previous proposal,” said Mackenzie.

“By 2024, the real impacts of the IRA will begin to come to fruition.”

Reference:

Rooftop solar: how homeowners should do the math on the climate change investment