So You Want to Buy an Electric Car: Does It Still Qualify for a Federal EV Tax Credit?

Some cars are still facing a manufacturer sales cap until 2023, while others have been disqualified altogether

(Image: Ford)
  • 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UPDATE 3/31/2023: This information is now out-of-date; the U.S. Treasury Department changed the rules on how EVs qualify for the new tax credit.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.

(Image: TFL Studios)

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.

Rivian R1S
(Image: Rivian)

2022 Model Year vehicles that may qualify for the revamped EV tax credit

Model YearMake/ModelEligible for tax credit now?
2022Audi Q5 TFSI e (PHEV)Yes
2022BMW 3 Series (PHEV)Yes
2022BMW X5 (PHEV)Yes
2022Chevrolet Bolt EUV (BEV)No (cap met, ineligible until early 2023)
2022Chevrolet Bolt EV (BEV)No (cap met, ineligible until early 2023)
2022Chrysler Pacifica (PHEV)Yes
2022Ford Escape (PHEV)Yes
2022Ford F-Series (F-150 Lightning BEV)Yes
2022Ford Mustang Mach-E (BEV)Yes
2022Ford E-Transit (BEV)Yes
2022GMC Hummer EV Pickup (BEV)No (cap met, ineligible until early 2023)
2022GMC Hummer EV SUV (BEV)No (cap met, ineligible until early 2023)
2022Jeep Grand Cherokee 4xe (PHEV)Yes
2022Jeep Wrangler 4xe (PHEV)Yes
2022Lincoln Aviator Grand Touring (PHEV)Yes
2022Lincoln Corsair Grand Touring (PHEV)Yes
2022Lucid Air (BEV)Yes
2022Nissan Leaf (BEV)Yes
2022Rivian EDV (Electric Delivery Van, BEV)Yes
2022Rivian R1S (BEV)Yes
2022Rivian R1T (BEV)Yes
2022Tesla Model 3 (BEV)No (cap met, ineligible until early 2023)
2022Tesla Model S (BEV)No (cap met, ineligible until early 2023)
2022Tesla Model X (BEV)No (cap met, ineligible until early 2023)
2022Tesla Model Y (BEV)No (cap met, ineligible until early 2023)
2022Volvo S60 Recharge (PHEV)Yes
2023BMW 3 Series (PHEV)Yes
2023Chevrolet Bolt EV (& EUV, BEVs)No (cap met, ineligible until early 2023)
2023Cadillac Lyriq (BEV)No (cap met, ineligible until early 2023)
2023Mercedes-Benz EQS (BEV)Yes
2023Nissan Leaf (BEV)Yes
BEV = Battery Electric Vehicle | PHEV = Plug-in Hybrid Electric Vehicle

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