As part of the highly-touted Inflation Reduction Act, Congress extended federal incentives in 2022 – however selectively – to help spur sales of full-electric cars and plug-in hybrids to reduce dependence on fossil fuels and cut greenhouse gases. They’re still in effect for 2024, though some models have dropped off an already short list due to a tightening of qualifying factors with regard to battery sourcing.
As it was only a relative handful of models were sold subject to the one-time $7,500 tax credit last year, with fewer purchasers qualifying for them because of income limitations included with the bill.
For starters, the measure restricts the one-time tax credit to electrified trucks, vans, and SUVs priced at less than $80,000, and passenger cars with MSRPs no higher than $55,000. Not only that, eligibility for the tax credit is limited to families having gross incomes of less than $300,000, $225,000 for heads of households and $150,000 for all other purchasers.
While that seems fairly clear-cut, it’s the rules regarding domestic sourcing that keeps many plug-in vehicles from being eligible for the credits. Vehicles must at the least be assembled in the U.S. to qualify for the incentive, which as it stands means the incentive does not apply to EVs and PHEVs sold by Kia, Hyundai, and Toyota, among others.
What’s more, as of January 1, EVs are required to have at least 40 percent of battery materials sourced by a U.S. company or a trading partner company from a favored nation to qualify for the credit, and would have to be 100 percent made in North America by 2029. As it stands, most of the lithium-ion batteries used by current EVs come from China.
A vehicle meeting both sourcing requirements may be eligible for the full $7,500 credit, and a vehicle meeting only one of these sourcing requirements is granted a credit of $3,750. A vehicle meeting neither requirement is deemed ineligible.
Because of this rule tightening, only 19 EVs and PHEVs still qualify for the $7,500 tax credit, which is down from 43 in calendar year 2023. Models dropped from the list for 2024 include the Cadillac Lyriq, Nissan Leaf, Volkswagen ID.4, Tesla Model 3 Rear Wheel Drive, BMW X5 xDrive50e and the Audi Q5 PHEV 55. Credits for Rivian EV trucks have been slashed from $7,500 to $3,750.
We’re running down the list of models that can still earn the tax credit and the applicable amount below. However, because some models are assembled in factories both here and abroad, consumers and dealers are recommended to check a given electrified ride’s vehicle information number (VIN) here to confirm its current eligibility in the program.
On the plus side, for 2024 the incentive has been switched from a one-time tax credit that’s claimed in the following tax year, to a rebate that’s now applicable at the point of sale to afford what amounts to an immediate price cut.
What’s more, the Inflation Reduction Act added a new incentive for those considering used electric cars in the form of a tax credit of up to $4,000 or 30 percent of a vehicle’s sale price of the vehicle, whichever is lower. To qualify, the vehicle must have had only a single owner, and it must be purchased from a dealership; assembly or parts sourcing limitations do not apply here. There are income limits for the used-EV credit, however, and they’re $150,000 for joint filers, $112,500 for a head of household, and $75,000 for an individual.
And note that some automakers whose EVs would not otherwise qualify for the program, particularly those from luxury import brands, have found a way to leverage a loophole in the legislation that allows their customers to take advantage of the $7,500 tax credit anyway, and they’re doing it via their leasing programs. Part of the bill that selectively restored the tax credits extended them without the aforementioned exceptions to commercial leasing entities (in this case a participating automaker’s financing division) that can claim the tax credit and pass it along to a lessee to reduce his or her cash due at signing and/or monthly payments.
Here’s a current list of models that still qualify for the federal tax credit; they’re subject to change at any time, and further depend on price and income qualification:
- 2022-2023 Chevrolet Bolt EV ($7,500)
- 2022-2023 Chevrolet Bolt EUV ($7,500)
- 2022-2024 Chrysler Pacifica PHEV ($7,500)
- 2022-2024 Ford Escape PHEV ($3,750)
- 2022-2024 Ford F-150 Lightning Extended and Standard Range ($7,500)
- 2022-2024 Jeep Grand Cherokee 4xe PHEV ($3,750)
- 2022-2024 Jeep Wrangler 4xe PHEV ($3,750)
- 2022-2024 Lincoln Corsair Grand Touring PHEV ($3,750)
- 2023-2024 Rivian R1S ($3,750)
- 2023-2024 Rivian R1T ($3,750)
- 2023-2024 Tesla Model 3 Performance ($7,500)
- 2023-2024 Tesla Model X Long Range ($7,500)
- 2023-2024 Tesla Model Y Performance and AWD ($7,500)
- 2024 Tesla Model Y Rear-Wheel Drive ($7,500)
Click onto the EPA’s fueleconomy.com website for further information.
