The credit is nonrefundable, which means it can lower or eliminate your tax liability, but you won't get any overage of the credit refunded once your liability hits zero.
You also won't be able to carry over any excess amount to offset future taxes. So if your tax liability was low, this would limit how much of the credit you would get.
The new tax credit, worth up to $7,500, is made up of battery and sourcing requirements, each adding up to half of the credit. If the car meets both requirements, it is eligible for the full credit. If it meets only one requirement, it may be eligible for a partial credit of $3,750.
To be eligible for the battery portion of the credit (up to $3,750), a certain percentage of the vehicle’s battery must be assembled or manufactured within North America. The percentage thresholds will be as follows:
2023: 50%
2024: 60%
2025: 60%
2026: 70%
2027: 80%
2028: 90%
2029 through 2032: 100%
Cars must meet a "critical minerals requirement" to receive the remaining $3,750 portion of the credit. This requirement stipulates that a certain percentage of critical minerals in the car's battery must be extracted or processed within the U.S. or within a country with whom the U.S. has a free-trade agreement. The percentage thresholds will be as follows:
2023: 40%
2024: 50%
2025: 60%
2026: 70%
2027 through 2032: 80%
Beginning in 2024, vehicles may also not source battery parts from a foreign country of concern (e.g., China). And starting in 2025, EVs cannot contain any critical minerals sourced from a foreign country of concern.
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