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Market Daily

Tax credit rules for next year not entirely clear

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


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.


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 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.”


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

First Republic Bank rescued by large banks, $30 billion loaned

First Republic BankThe banking industry has entered a crisis as numerous banks confront diminishing customer and investor trust.

Silicon Valley Bank and Signature collapsed late last week, and Credit Suisse in Europe is also in trouble.

This week, First Republic Bank is grappling with fragile investor and consumer trust.

Unlike other institutions, however, there is still hope for the bank, since it is due to get a lifeline from some of America’s most important banks.

The news

While First Republic Bank faces a credibility crisis, many American central banks are offering it a $30 billion lifeline.

Some of the banks that are assisting include:

  • Bank of America
  • Citigroup
  • JPMorgan Chase
  • Truist
  • Wells Fargo

The Treasury Department issued the following statement on Thursday:

“This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system.”

The help

The $30 billion will provide the ailing San Francisco bank with the funds it requires to satisfy consumer withdrawals.

It also helps the US banking sector in the midst of a widespread lender crisis.

The banks issued the following statement:

“This action by America’s largest banks reflects their confidence in First Republic and in banks of all sizes.”

“[And] it demonstrates their overall commitment to helping banks serve their customers and communities.”

“Regional, midsize, and small banks are critical to the health and functioning of our financial system.”

“The banking system has strong credit, plenty of liquidity, strong capital, and strong profitability. Recent events did nothing to change this.”

“Together, we are deploying our financial strength and liquidity into the larger system, where it is needed the most,” they continued.

“America’s larger banks stand united with all banks to support our economy and all of those around us.”

Liquidity problems

First Republic Bank’s shares were stopped three times on Thursday due to volatility.

Yet, it ended the day at more than 10%.

The bank’s issues highlighted the ongoing concerns about the banking industry following the failures of Silicon Valley and Signature Bank.

Concerns were raised on Wednesday about depositors’ capacity to withdraw their funds.

As a result, First Republic Bank’s credit rating was reduced by Fitch Ratings and S&P Global Ratings.

First Republic Bank is one of the regional banks having a large number of uninsured deposits in excess of the $250,000 FDIC limit.

While it does not compare to Silicon Valley Bank’s large 94% uninsured deposits, S&P Global reports that First Republic has a sizable 68% of total deposits that are uninsured.

Nonetheless, many clients chose to quit the bank and deposit their funds elsewhere, posing a challenge for First Republic Bank.

As a result, the bank has two options: borrow money or sell assets in order to pay consumers in cash for their deposits.

Banks generate money by lending parts of their customers’ deposits to other customers.

Even so, First Republic Bank has an extraordinary liability-to-deposit ratio of 111%, according to S&P Global.

The ratio implies that the bank lent more money than it had in client deposits, indicating that it is a hazardous investment for investors.

Read also: Credit Suisse takes up Swiss National Bank’s loan offer after 30% shares crash

Private meeting

Treasury Secretary Janet Yellen met privately with JP Morgan CEO Jamie Dimon on Thursday, according to two persons familiar with the matter.

They met before agreeing to put $30 billion in First Republic Bank to keep it solvent.

The meeting was the culmination of two days of meetings between Yellen and other US authorities as well as heads of the country’s top banks.

The two sides worked together to find a solution for the bank’s problems.

Janet Yellen led the government effort, while Dimon urged bank CEOs to support the influx of deposits.

According to a source, Yellen proposed gathering together the top US banks to make direct deposits for First Republic Bank.

The action was crucial in terms of preserving the bank’s deposit base.

That was also an important signal to the financial market about the bank and the American financial system.

Loan system

Following the fall of Silicon Valley Bank, the Federal Reserve established a lending system to avoid regional banks from failing.

The program permits banks to provide the Fed with Treasury bonds as security for one-year loans.

The Fed would then reimburse banks for the value of the Treasuries, which fell in value when the Fed raised interest rates last year.

The federal assistance looks insufficient to keep investors happy.

On Sunday, First Republic Bank unveiled a partnership with JPMorgan to fast access liquidity if needed.

Furthermore, the bank stated that it has $70 billion in idle assets that it will utilize to cover consumer withdrawals if necessary.

Image source: CNBC