As sales of electric vehicles continue to surge, many new and prospective customers have questions about qualifying for federal tax credit on electric vehicles, especially now that a slew of new credits have been reinstated to US consumers.

Whether you qualify is not a simple yes or no question… well, actually it sort of is, but the amount you may qualify for varies by household due to a number of different factors. Furthermore, there are other potential savings available to you that you might not even know about yet.

Luckily, we have compiled everything you need to know about tax credits for your new or current electric vehicle into one place. The goal is to help ensure you are receiving the maximum value on your carbon-conscious investment because, let’s face it, you’ve gone green and you deserve it.

How does a federal tax credit work for my EV?

The idea in theory is quite simple — “All electric and plug-in hybrid vehicles that were purchased new in or after 2010 may be eligible for a federal income tax credit of up to $7,500,” according to the US Department of Energy.

With that said, you cannot simply go out and buy an electric vehicle and expect Uncle Sam to cut $7,500 off your taxes in April. In reality, the amount you qualify for is based on both your income tax as well as the size of the electric battery in the vehicle you own.

Now, thanks to the freshly inked Inflation Reduction Act, there are a lot more parameters to be mindful of, like the requirement that the EV must be assembled in North America for instance. We have dug into those new terms more below.

To begin, here’s how the Federal EV tax credit currently works.

electric vehicle tax credit

How much is the federal tax credit?

First and foremost, it’s important to understand three little words the government slips in front of the $7,500 credit – “may” and “up to.” As in, you may qualify for up to $7,500 in federal tax credit for your electric vehicle. At first glance, this credit may sound like a simple flat rate, but that is unfortunately not the case.

For example, if you purchased a Ford F-150 Lightning and owed say, $3,500 in income tax this year, then that is the federal tax credit you would receive. If you owed $10,000 in federal income tax, then you would qualify for the full $7,500 credit.

It’s important to note that any unused portion of the $7,500 is not available as a refund, nor as a credit for next year’s taxes. Bummer.

However, under new terms of the tax deal, you may be able to snag that credit up front at the point of sale of your EV. More on that below.

Ford-F-150 Lightning-price

The Biden administration continues to expand EV adoption

President Biden first vowed to make the nation’s entire federal fleet all-electric. The White House has introduced two bills to expand EV adoption, one of which was signed by the President and includes funding for heavily expanded EV charging infrastructure.

Previously, there were rumors that the federal tax credit would be increased to $10,000. In President Biden’s previous $174 billion investment plan for electrification, the tax credit was quickly mentioned as a reform. However, the summary remained vague about the reform – only confirming that it will not only take the form of tax rebates but also “point of sale rebates” and it will now be for “American-made EVs.”

The second and larger bill sat within Biden’s “Build Back Better Act” and subsequent increases to the federal tax credit, but it couldn’t get past the Senate in late 2021. At that point, the revamped tax credit we all have sought was in limbo, possibly DOA. Until this past summer…

Revived EV tax credits have officially been signed by POTUS

In late July 2022 the US Senate shared it was moving forward to vote on EV tax credit reform after Senator Joe Manchin (D-WV) took a break from huffing coal to finally agree to include investments to curb climate change.

One of the most prominent parts of the bill (to us) includes the long-awaited and fought over electric vehicle tax credit reform. In this iteration of the bill, access to the tax credit will be returned to those who have already exhausted the threshold, including Tesla and GM vehicles.

On August 7, 2022 it was approved by the Senate and a week later signed into law by President Biden.

The biggest issue we all are having with the Inflation Reduction act, is how cloudy and confusing its EV requirements are. Bear with us as we sort through it all, to once again provide you with the most up to date details of this ever evolving tale.

We have learned that the reform bill will also apply to EVs delivered after December 31, 2022. Here’s a breakdown of the terms of the new Inflation Reduction Act.

New Federal Tax Credits under the Inflation Reduction Act

  • Federal tax credit for EVs will remain at $7,500
    • Timeline to qualify is extended a decade from January 2023 to December 2032
  • Tax credit cap for automakers after they hit 200,000 EVs sold is eliminated, making GM, Tesla and Toyota once again eligible
  • The language in the bill indicates that the tax credit would be implemented at the point of sale instead of on taxes at the end of the fiscal year
    • That means you can get your credit up front at the dealer, but these terms may not kick in until 2024
    • In order to get the full credit, the EV must be assembled in North America and…
    • The majority of battery components need to come from North America and…
    • A certain percentage of “critical minerals” must come form North America or countries with free trade agreements with the US
  • New federal tax credit of $4,000 for used EVs priced below $25k
    • Subject to other requirements like lower annual income (see below)
  • Revised credit applies to BEV cars with an MSRP below $55k
  • Also includes zero-emission vans, SUVs, and trucks with MSRPs up to $80,000
  • New credit also expands to commercial fleet customers
    • Includes separate qualifications and limits
  • The federal EV tax credit will be available to individuals reporting adjusted gross incomes of $150,000 or less, or $300,000 for joint filers
  • The new credit will also continue to apply to Plug-in Hybrid EVs (PHEVs) as long as they meet the same requirements outlined above and are equipped with a battery over 7 kWh.

Here are more detailed terms of the tax credits under the inflation reduction act, detailed byl awyer, Chris Stidham:

Revamped Credit for new BEV/PHEVs

  1. Manufacturer caps eliminated. (Page 370, line 15)
  2. Credit applies for vehicles purchased beginning January 1, 2023. (Page 386, line 1)
  3. Transition provision for EVs with written sales orders dated in 2022 prior to the date of President signing the bill but delivered in 2023 allows purchaser to claim the “old” credit in 2023. (Page 386, line 20)
  4. Vehicle must be assembled in North America to qualify for new credit. (Page 366, line 15)
  5. North American assembly requirement applies to vehicles sold after the date of adoption of the bill. (Page 386, line 3)
  6. $7,500 credit is broke into two binary pieces meaning the vehicle either qualifies for each piece of the credit or it doesn’t. No longer based on size of battery. (Page 366, line 6)
  7. $3,750 of the new credit is based upon the vehicle having at least 40% of its battery critical minerals from the United States or countries with a free trade agreement with the United States. This is a list of countries with free trade agreements with the US. (Page 371)
  8. The other $3,750 of the new credit is based on at least 50% of the battery components of the vehicle coming from the United States or countries with a free trade agreement with the US. (Page 372, line 13)
  9. The 40% minerals requirement increases to 50% in 2024, 60% in 2025, 70% in 2026 and 80% in 2027. (page 371 line 23)
  10. The 50% battery components requirement increases to 60% in 2024, 70% in 2026, 80% in 2027, 90% in 2028 and 100% in 2029. (Page line 373)
  11. The government has until the end of the year to develop guidance on the battery requirements. (Page 374)
  12. Beginning in 2025, any vehicle with battery minerals or components from a foreign entity of concern are excluded from the tax credit. (Page 374, line 20).
  13. One credit per vehicle. (Page 375, line 12)
  14. Modified gross income limit of $150k for individuals, $225k for head of household, and $300k for joint returns. Definition of MAGI (page 375, line 22)
  15. MSRP of vehicle must be $80k or less for SUVs, Vans and Trucks. $55k for all other vehicles. (Page 377, line 4)
  16. Dealer can apply credit at time of sale. Dealer must disclose to buyer the MSRP of the vehicle, the applicable tax credit amount and the amount of any other available incentive applicable to the purchase. (Page 378, line 6)
  17. Credit terminates December 31, 2032.

Revamped Used Vehicle Credit

  1. Tax credit of 30% of value of used EV with $4,000 cap (Page 387, line 23).
  2. Used vehicle must be at least two model years old at time of sale. (Page 389, line 7).
  3. The original use of the vehicle must have occurred with an individual other than the one claiming the used tax credit. (Page 389, line 10).
  4. Used vehicle must be purchased from a dealer. (Page 390, line 3).
  5. Used vehicle price must be $25k or less. (Page 390, line 5).
  6. Used vehicle qualifies for tax credit only once in its lifetime. (Page 390, line 7)
  7. Purchaser must be an individual (no businesses) to qualify for used credit. (Page 390, line 14).
  8. Purchaser may only claim one used vehicle credit per three years. (Page 390, line 20).
  9. Modified gross income cap of $75k for individuals, $112,500 for head of household and $150k for joint returns. (Page 388).
  10. Credit may be applied at time of sale by dealer. (Page 391, line 15).
  11. Credit terminates on December 31, 2032. (Page 391, line 12).

What are the current electric vehicle credits before the terms change?

As you’ll see from the rather barren list below of EVs that currently qualify under the new terms of the Inflation Reduction Act, a majority of EVs currently available for credits to US consumers will soon no longer qualify.

That isn’t to say they won’t be back on in the yes column come January 1, 2023 since many of these automakers do have North American production facilities. Other EVs like Rivian models for example are American made, but some are priced above the $80k threshold for trucks.

Fisker has been long touting is flagship Ocean SUV as an EV priced below $30k for those who qualify for the entire $7,500 credit. However, under the new terms, the Austrian built SUV will qualify for zero federal credits. That being said, its current MSRP of $37,499 is still pretty enticing, but this is a major blow to its marketing strategy to the point that the American automaker is now considering adding US production for the Ocean.

The quick workaround that felt like a mad scramble was some verbiage allowing for “written binding contracts” under a “transition rule” in the Inflation Reduction Act. That rule allowed consumers to still qualify if they signed the binding contract before the date of bill being signed into law, even if the car is delivered after the bill is signed. This is covered on page 393-394 of the bill.

Since the bill has been signed into law, this quick workaround is no longer possible. We’ve put together a full breakdown of where those tax credits stand for EV automakers not currently assembling in the North America.

Vehicles purchased and delivered between August 16 and December 31, 2022

Following the official signing of the Inflation Reduction Act, the IRS has included the following transition rule for those who already had an EV on the way but are wondering if they still qualify before the new credit terms kick in. In certain circumstances, the answer is yes. Per the IRS page:

If you purchase and take possession of a qualifying electric vehicle after August 16, 2022 and before January 1, 2023, aside from the final assembly requirement, the rules in effect before the enactment of the Inflation Reduction Act for the EV credit apply (including those involving the manufacturing caps on vehicles sold).

Fisker Ocean 2022
The upcoming Fisker Ocean, starting at an MSRP of $37,499 / Source: Fisker Inc.

What electric vehicles could qualify under the latest tax credit?

Alright, this is probably the main reason why you’re here. If you scrolled through the details above, you may want to consider going back and at least skimming, because there are some major changes to federal tax credits to electric vehicles under the Inflation Reduction Act.

Under the terms mentioned above, these are the EVs that could qualify for the full $7,500 credit beginning January 1, 2023.

Please note that the list below features EVs assembled in North America and comes directly from fueleconomy.gov who, like all of us is still figuring out which EVs will actually qualify. Bear with us and trust we will keep this list updated often.

All-electric vehicles

Make and Model Full Tax Credit
CADILLAC (GM) (does not qualify until 1/1/23)
Lyriq (2023) $,7500
CHEVROLET (GM) (does not qualify until 1/1/23)
Bolt EUV (2022) $7,500
Bolt EV (2022-2023) $7,500
FORD
F-150 Lightning (2022) (Pro, XLT, and Lariat trims) $7,500
Mustang Mach-E (2022) $7,500
E-Transit (2022) $7,500
NISSAN
LEAF (2022-2023) $7,500
RIVIAN
EDV 700 (2022) $7,500
R1T (2022) (Dual Motor Adventure only) $7,500
R1S (2022) (Dual Motor Adventure only) $7,500
TESLA (does not qualify until 1/1/23)
Model 3 (2022) $7,500
Model Y (2022) $7,500
Current as of 9/3/22
GM EV production
Hummer EV off road Source: GMC

Plug-in Hybrid Electric Vehicles

Make and Model Full Tax Credit
AUDI
Q5 (2022) $7,500
BMW
330e (2022-2023) $7,500
X5 xDrive45e (2022) $7,500
CHRYSLER
Pacifica Plug-in Hybrid (2022) $7,500
FORD
Escape Plug-in Hybrid (2022) $7,500
JEEP
Grand Cherokee PHEV (2022) $7,500
Wrangler Unlimited PHEV (2022) $7,500
LINCOLN
Aviator PHEV (2022) $7,500
Corsair Plug-in Hybrid (2022) $7,500
VOLVO
S60 (2022) $7,500
Current as of 9/3/22

What electric vehicles qualify under the previous tax credit?

Although the credits above should be the focus going forward, we wanted to keep the previous credit details below. Less of a trip down memory lane, but more of a list of what EVs previously qualified, so you can gather how many will be lost under current terms.

As we previously mentioned however, some of these EVs could eventually once again qualify, as automakers pivot to bring their assembly to North America.

All-electric vehicles

Make and Model Full Tax Credit
AUDI
e-tron Sportback (2020-2022) $7,500
e-tron SUV (2019, 2021-2022) $7,500
e-tron GT / RS e-tron GT (2022) $7,500
e-tron S (Standard and Sportback) $7,500
Q4 50 e-tron Quattro $7,500
BMW
i3 Sedan (2014-2021) $7,500
i3s (2018-2021) $7,500
i4 eDrive40/M50 Gran Coupe (2022) $7,500
iX xDrive50/M60 (2022) $7,500
BYD
e6 (2012-2017) $7,500
ELECTRIC LAST MILE SOLUTIONS (ELMS)
ELMS Urban Delivery (2022) $7,500
FIAT
500e (2013-2019) $7,500
FORD
Focus EV (2012-2018) $7,500
Mustang Mach-E (all 2021/2022 trims including GT) $7,500
E-Transit (2022) $7,500
F-150 Lightning (standard/extended range) (2022) $7,500
GENERAL MOTORS (GM)
Not currently eligible for tax credits –––––
GENESIS
GV60 (2023) $7,500
HYUNDAI
Ioniq Electric (2017-2021) $7,500
Ioniq 5 (2022) $7,500
Kona Electric (2019-2022) $7,500
JAGUAR
I-Pace (2019-2022) $7,500
I-Pace HSE (2022-2023) $7,500
KANDI
EX3 (2019-2021) $7,500
K22 (2019-2020) $7,500
K23 (2020-2022) $7,500
K27 (2020-2022) $7,500
KIA
Niro EV (2019-2022) $7,500
Soul Electric (2015-2020) $7,500
EV6 (58 kWh, 77.4 kWh) (2022) $7,500
LUCID MOTORS
Lucid Air Dream Edition (2022) $7,500
Lucid Air Grand Touring (2022) $7,500
MAZDA
MX-30 (2022) $7,500
MERCEDES-BENZ
AMG EQS (2022) $7,500
EQS 450+ (2022) $7,500
EQS 580 4matic (2022) $7,500
B-Class EV (2014-2017) $7,500
MINI
Cooper S E Hardtop 2 & 4 Door (2020-2023) $7,500
MITSUBISHI
i-MiEV (2012, 2014, 2016, 2017) $7,500
NISSAN
LEAF (2011-2022) $7,500
POLESTAR
Polestar 2 (2021) $7,500
Polestar 2 Long Range – Single & Dual Motor (2022) $7,500
PORSCHE
Taycan (2020-2022) (all trims) $7,500
RIVIAN
R1T (2022) $7,500
R1S (2022) $7,500
EDV 700 (2022) $7,500
SMART USA
EQ fortwo Coupe (2019) $7,500
EQ fortwo Cabrio (2019) $7,500
SUBARU
Solterra (2023) $7,500
TESLA
Not currently eligible for tax credits –––––
TOYOTA
Toyotas purchased after 9/30/23 are no longer eligible for tax credits –––––
RAV4 EV (2012-2014) $7,500
VOLKSWAGEN
e-Golf (2015-2019) $7,500
ID.4 EV (First/Pro/Pro S) (2021) $7,500
VOLVO
C40 Recharge Pure Electric (2022) $7,500
XC40 Recharge Pure Electric (2021-2022) $7,500
Last Update 8/17/2022
electric vehicle tax credit
The 2023 Subaru Solterra

Plug-in hybrid electric vehicles (PHEVs)

The US Department of Energy offers the full detailed list on its website.

Make and Model Full Tax Credit
AUDI
A3 e-tron / e-tron ultra (2016-2018) $4,502
A7 55 TFSI e Quattro (2021) $6,712
A7 TFSI e Quattro (2022) $7,500
A8L PHEV (2020) $6,712
A8L 60 TFSI e Quattro (2021) $6,712
Q5 PHEV (2020) $6,712
Q5 55 TFSI e Quattro (2021) $6,712
Q5 TFSI e Quattro (2022) $7,500
BENTLEY
Bentayga Hybrid (2020-2021) $7,500
BMW
i3 Sedan w/ Range Extender (2014-2021) $7,500
i3s w/ Range Extender (2018-2021) $7,500
BMW i8 (2014-2017) $3,793
i8 Coupe/Roadster (2018-2020) $5,669
X3 xDrive30e (2020-2021) $5,836
X5 xDrive40e (2016-2018) $4,668
X5 xDrive45e (2021-2022) $7,500
330e (2016-2018) $4,001
330e/330e xDrive (2021-2022) $5,836
530e/530e xDrive (2018-2019) $4,668
530e/530e xDrive (2020-2022) $5,836
740e (2017) $4,668
740e xDrive (2018-2019) $4,668
745e xDrive (2020-2022) $5,836
CHRYSLER
Pacifica Plug-In Hybrid (2017-2022) $7,500
FERRARI
SF90 Stradale (2020-2021) $3,501
FISKER AUTOMOTIVE
Karma Sedan (2012) $7,500
FORD
C-Max Energi (2013-2017) $4,007
Fusion Energi (2013-2018) $4,007
Fusion Energi (2019-2020) $4,609
Escape Plug-in Hybrid (2020-2022) $6,843
GENERAL MOTORS (GM)
Not currently eligible for tax credits –––––
HONDA
Accord Plug-in Hybrid (2014) $3,626
Clarity Plug-in Hybrid (2018-2021) $7,500
HYUNDAI
Ioniq Plug-in Hybrid (2018-2022) $4,543
Sonata Plug-in Hybrid (2016-2019) $4,919
Tucson Plug-in Hybrid (2022) $6,587
Santa Fe Plug-in Hybrid (2022) $6,587
JEEP
Grand Cherokee PHEV (2022) $7,500
Wrangler Unlimited PHEV (2021-2022) $7,500
KARMA
Revero (2018-2020) $7,500
KIA
Niro Plug-in Hybrid (2018-2022) $4,543
Optima Plug-in Hybrid (2017-2020) $4,919
Sorento Plug-in Hybrid (2022) $6,587
LAND ROVER
Range Rover/Sport PHEV (2019) $7,087
Range Rover/Sport PHEV (2020-2022) $6,295
Range Rover SE PHEV (2023) $7,500
Rover Range Rover Sport Autobiography PHEV (2023) $7,500
LEXUS
Lexus’ purchased after 9/30/23 are no longer eligible for tax credits –––––
NX Plug-in Hybrid (2022) $7,500
LINCOLN
Aviator Grand Touring (2020-2022) $6,534
Corsair Reserve Grand Touring PHEV (2021-2022) $6,843
Corsair Grand Touring PHEV (2022) $6,843
McLAREN
Artura (2022) $4,585
MERCEDES-BENZ
S550e Plug-in Hybrid (2015-2017) $4,460
GLE550e 4matic (2016-2018) $4,460
GLC350e 4matic (2018-2019) $4,460
GLC350e 4M EQ (2020) $6,462
S560e EQ PHEV (2020) $6,462
C350e (2016-2018) $3,501
MINI
Cooper S E Countryman ALL4 (2018-2019) $4,001
Cooper S E Countryman ALL4 (2020-2022) $5,002
MITSUBISHI
Mitsubishi Outlander Plug-in (2018-2020) $5,836
Mitsubishi Outlander Plug-in (2021-2022) $6,587
POLESTAR
Polestar 1 (2020-2021) $7,500
PORSCHE
Cayenne S E-Hybrid (2015-2018) $5,336
Cayenne E-Hybrid / Coupe (2019-2020) $6,712
Cayenne Turbo S E-Hybrid / Coupe (2021) $7,500
Cayenne E-Hybrid / Coupe (2021-2022) $7,500
Panamera S E-Hybrid (2014-2016) $4,752
Panamera 4 E-Hybrid (2018) $6,670
Panamera 4 E-Hybrid (2019-2020) $6,712
Panamera 4 E-Hybrid (2021-2022) $7,500
SUBARU
Crosstrek Hybrid (2019-2022) $4,502
TESLA
Not currently eligible for tax credits –––––
TOYOTA
Toyotas purchased after 9/30/23 are no longer eligible for tax credits –––––
Prius Plug-in Hybrid (2012-2015) $2,500
Prius Prime Plug-in Hybrid (2017-2022) $4,502
RAV4 Prime Plug-in Hybrid (2021-2022) $7,500
VOLVO
S60 (2019) $5,002
S60 (2020-2022) $5,419
S60 Extended Range (2022) $7,500
S90 (2018-2019) $5,002
S90 (2020-2022) $5,419
S90 Extended Range (2022) $7,500
V60 (2020-2022) $5,419
V60 Extended Range (2022) $7,500
XC60 (2018-2019) $5,002
XC60 (2020-2022) $5,419
XC60 Extended Range (2022) $7,500
XC90 (2016-2017) $4,585
XC90 / XC90 Excellence (2018-2019) $5,002
XC90 (2020-2022) $5,419
XC90 Extended Range (2022) $7,500
Last Update 8/17/2022

Other tax credits available for electric vehicle owners

So now you should know if your vehicle does in fact qualify for a federal tax credit, and how much you might be able to save.

State tax incentives

In additional to any federal credit you may or may not qualify for, there are a number of clean transportation laws, regulations, and funding opportunities available at the state level.

For example, in the state of California, drivers can qualify for a $2,000-$4,500 rebate or a grant up to $5,000 under the Clean Vehicle Assistance Program on top of any federal credit received (all rebate and grant amounts are based on income). Furthermore, states like California offer priority driving lanes and parking spots for EV drivers who qualify.

In New York, residents can receive either a $500 or $2,000 rebate depending on the base price of the EV purchased. Again, these incentives vary by state, and much like the federal tax credit, are contingent on multiple factors.

To check what incentives you may qualify for, the Alternative Fuels Data Center is a great resource from the US Department of Energy. This page allows you to tap or click your respective state and research what options might be available to you and your electric vehicle.

Source: Fueleconomy.gov

Tax incentives on electric vehicles are worth the research

Hopefully this post has helped to incentivize you to use the resources above to your advantage.

Whether it’s calculating potential savings or rebates before making a new EV purchase or determining what tax credits might already be available to you for your current electric vehicle, there is much to discover.

Ditching fossil fuels for greener roadways should already feel rewarding, but right now the government is willing to reward you further for your environmental efforts.

Use it to your full capability while you can, because as more and more people start going electric, the less the government will need to reward drivers.

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About the Author

Scooter Doll

Scooter Doll is a writer, designer and tech enthusiast born in Chicago and based on the West Coast. When he’s not offering the latest tech how tos or insights, he’s probably watching Chicago sports.
Please send any tips or suggestions, or dog photos to him at scooter@9to5mac.com