With the Inflation Reduction Act, the 200,000 sales cap on tax credit is gone, and EVs from Tesla and General Motors are once again eligible for the tax credit.
The new clean vehicle tax credit, which came into effect in January 2023, is bringing down the cost of owning an electric vehicle. Before the IRA (Inflation Reduction Act), popular brands like Tesla and General Motors were not eligible because of the sales limit. Thanks to new legislation, some of the best EVs, such as the Tesla Model Y and Chevrolet Bolt now qualify for the tax credit. But electric vehicles assembled outside the US are now disqualified.
Normally, when an EV manufacturer sells 200,000 vehicles in the United States, the $7,500 federal tax credit halves to $3,750, and that process repeats a few times before being reduced to no credit. Tesla and General Motors already sold more than enough eligible EVs. So, there is no tax credit for these brands, right? Not quite. Let us explain.
With the Inflation Reduction Act, the 200,000 sales cap on tax credit is gone, and EVs from Tesla and General Motors are once again eligible for the tax credit. But there are now price caps for different kinds of vehicles. We try to sum up some of the new details of tax credit eligibility and created a list of vehicles eligible for the tax credit in the United States.
Update 2 (18th Feb, 2023): Genesis Electrified GV70 became the first Hyundai Group EV to earn tax credit eligibility. The luxury SUV is being produced at Korean carmaker’s Alabama plant.
Update 1: All Tesla Model Y variants, Ford Mustang Mach-E, VW ID.4, and Cadillac Lyriq are now eligible under the SUV MSRP cap $80,000, according to latest regulatory changes made by IRS on February 3rd, 2023.
List of Electric Vehicles That Qualify for New Clean Vehicle Tax Credit
Qualified Vehicles | MSRP Limit | Retail Price Range |
---|---|---|
Genesis Electrified GV70 | $80,000 | $65,850 – $73,225 |
Ford F-150 Lightning | $80,000 | $55,974 – $96,874 |
Ford Mustang Mach-E | $80,000 | $46,895 – $69,895 |
Ford E-Transit | $80,000 | $49,575 – $53,790 |
Chevrolet Bolt | $55,000 | $27,495 – $30,695 |
Chevrolet Bolt EUV | $55,000 | $28,795 – $33,790 |
Cadillac Lyriq | $80,000 | $62,990 |
Rivian R1S | $80,000 | $78,000 – $92,000 |
Rivian R1T | $80,000 | $73,000 – $89,000 |
Tesla Model 3 RWD | $55,000 | $43,990 |
Tesla Model 3 Performance | $55,000 | $53,990 |
Tesla Model Y AWD Long Range | $80,000 | $53,490 |
Tesla Model Y Performance | $80,000 | $56,990 |
Volkswagen ID.4 (inc. Pro, Pro S, S variants) | $80,000 | $38,995 – $51,445 |
Volkswagen ID.4 AWD (inc. Pro, Pro S variants) | $80,000 | $47,795 – $55,245 |
Nissan Leaf S | $55,000 | $28,040 |
Nissan Leaf SV Plus | $55,000 | $36,040 |
According to Consumer Reports, new tax credit rules will go into place in March 2023. This new bill will limit the credit value based on the vehicle’s battery origin, the origin of the battery materials, etc. And starting in 2024, the tax credit eligibility will be lost, if any materials of the battery are from “foreign entities of concern”, such as China and Russia. EV manufacturers are notifiying customers to finalize their order before the new rules take effect.
Do Leased Electric Vehicles Qualify for Tax Credit?
The EV tax credit requirements will get stricter each year through 2026. By the time all rules go into effect, a large portion of electric vehicles will lose their eligibility. But there is an alternative to purchasing an EV to benefit from clean vehicle incentives.
If an electric vehicle is leased, most of the requirements for purchasing a vehicle may not apply. For instance, you could lease an EV made outside the US and still get a tax credit. The credit will be received by the dealer, not the person leasing the vehicle, but it is up to your leaser to pass the saving on to your payments.
Thanks to new rules, expensive electric vehicles like Lucid Air, and Tesla Model S may also benefit from tax credit if a customer chooses to lease instead of purchase.
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