- President Biden signed the Inflation Reduction Act of 2022 Tuesday — changing key elements of the federal EV tax credit.
- A new requirement comes into effect immediately that EVs are manufactured in North America to qualify for the $7,500 credit.
- The U.S. Department of Energy and Internal Revenue Service published updated guidance on how the law affects EVs, and which vehicles may qualify under the new rules.
- This updated EV tax credit applies to vehicles purchased after August 16, 2022.
UPDATE 3/31/2023: This information is now out-of-date; the U.S. Treasury Department changed the rules on how EVs qualify for the new tax credit. The new rules take effect on April 18, 2023. Find the updated information here: U.S. Treasury Department Releases New EV Tax Credit Guidance: Here’s What It Means For You
Some electric models will once again be eligible for a $7,500 tax credit in January 2023.
On Tuesday, President Joe Biden signed the Inflation Reduction Act into law, codifying significant changes to how the federal EV tax credit will work moving forward. Most critically, a provision stipulating that electric cars must have final assembly in North America disqualifies roughly 70% of the models that were previously eligible, according to the Alliance for Automotive Innovation. Over time, some manufacturers will have to seriously rework their supply chain logistics and vehicle production if they want their cars to actually make the cut.
So, which cars do actually still qualify? There’s been intense discussion on the matter, and now that the law is firmly in place, the U.S. Department of Energy published a list of the 20-or-so cars for which you can claim the $7,500 credit this year. Keep in mind that North American assembly requirement, though, as the IRS states that some vehicles may qualify — so making it on that list is not necessarily a guarantee. Both agencies pointed to the National Highway Traffic Safety Administration’s VIN decoder to help drill down into where the electric car you’re shopping for is actually built.
Some vehicles — like all Tesla models, for example — are still subject to the old 200,000-unit manufacturer cap through the rest of this year. Those cars will not be eligible for the “Clean Vehicle Credit” this year, but will qualify once again in 2023, so long as those models still meet the final assembly requirement.
No EVs from Hyundai, Kia, Porsche or Toyota currently qualify for the fresh EV tax credit, with one exception.
If you bought a vehicle outside the list before August 16, you do still qualify for the tax credit.
There is a transition rule in place (at least, what counts as a “transition” by U.S. government standards) for those who bought their EVs before August 16, 2022. According to the IRS:
“If you entered into a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022, but do not take possession of the vehicle until on or after August 16, 2022 (for example, because the vehicle has not been delivered), you may claim the EV credit based on the rules that were in effect before August 16, 2022. The final assembly requirement does not apply before August 16, 2022.“
Finally, if automakers rework their production to accommodate the Inflation Reduction Act, they may make it onto the DoE’s list at a later date. If you’re in the market, make sure to check back frequently to see if the vehicle you’re interested in may be listed on the agency’s website, in addition to using the VIN decoder.
More manufacturing provisions kick in come January 1, 2023.
Yet another factor to consider: On January 1, restrictions on component (battery) sourcing and raw materials for the construction of EVs come into play. The law also puts income caps into place: $150,000 for single filers, and $300,000 for joint filers.
By 2024, buyers will also be able to transfer their tax credits to dealers at point-of-sale for an immediate discount, rather than having to put in for the credit when filing their taxes.
2022 Model Year vehicles that may qualify for the revamped EV tax credit
| Model Year | Make/Model | Eligible for tax credit now? |
|---|---|---|
| 2022 | Audi Q5 TFSI e (PHEV) | Yes |
| 2022 | BMW 3 Series (PHEV) | Yes |
| 2022 | BMW X5 (PHEV) | Yes |
| 2022 | Chevrolet Bolt EUV (BEV) | No (cap met, ineligible until early 2023) |
| 2022 | Chevrolet Bolt EV (BEV) | No (cap met, ineligible until early 2023) |
| 2022 | Chrysler Pacifica (PHEV) | Yes |
| 2022 | Ford Escape (PHEV) | Yes |
| 2022 | Ford F-Series (F-150 Lightning BEV) | Yes |
| 2022 | Ford Mustang Mach-E (BEV) | Yes |
| 2022 | Ford E-Transit (BEV) | Yes |
| 2022 | GMC Hummer EV Pickup (BEV) | No (cap met, ineligible until early 2023) |
| 2022 | GMC Hummer EV SUV (BEV) | No (cap met, ineligible until early 2023) |
| 2022 | Jeep Grand Cherokee 4xe (PHEV) | Yes |
| 2022 | Jeep Wrangler 4xe (PHEV) | Yes |
| 2022 | Lincoln Aviator Grand Touring (PHEV) | Yes |
| 2022 | Lincoln Corsair Grand Touring (PHEV) | Yes |
| 2022 | Lucid Air (BEV) | Yes |
| 2022 | Nissan Leaf (BEV) | Yes |
| 2022 | Rivian EDV (Electric Delivery Van, BEV) | Yes |
| 2022 | Rivian R1S (BEV) | Yes |
| 2022 | Rivian R1T (BEV) | Yes |
| 2022 | Tesla Model 3 (BEV) | No (cap met, ineligible until early 2023) |
| 2022 | Tesla Model S (BEV) | No (cap met, ineligible until early 2023) |
| 2022 | Tesla Model X (BEV) | No (cap met, ineligible until early 2023) |
| 2022 | Tesla Model Y (BEV) | No (cap met, ineligible until early 2023) |
| 2022 | Volvo S60 Recharge (PHEV) | Yes |
| 2023 | BMW 3 Series (PHEV) | Yes |
| 2023 | Chevrolet Bolt EV (& EUV, BEVs) | No (cap met, ineligible until early 2023) |
| 2023 | Cadillac Lyriq (BEV) | No (cap met, ineligible until early 2023) |
| 2023 | Mercedes-Benz EQS (BEV) | Yes |
| 2023 | Nissan Leaf (BEV) | Yes |
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