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The updated Clean Vehicle tax credit has made many electric vehicles ineligible. Read on to discover which 22 EVs do qualify.
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It’s been a little over a month since the IRS’s new requirements took effect for its $7,500 Clean Vehicle tax credit. And, as with most things involving our tax agency, the new rules still have some would-be EV purchasers scratching their heads in confusion.
Eligible EV purchasers can receive a $3,750 or $7,500 tax credit and up to $4,000 for a pre-owned EV. That’s simple enough. But in order for an EV to qualify it has to meet numerous requirements, such as where its critical metals are sourced, where the vehicle is assembled, and even how much it weighs.
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The rules get even more complicated than that. But if you’re on the market for an EV, here’s how you can determine if it meets the Clean Vehicle tax credit requirements.
Which EVs qualify for the Clean Vehicle tax credit?
For an EV to qualify for part or all of the Clean Vehicle tax credit, it has to meet two very important criteria:
At least 40% of the vehicle’s critical metals were extracted in the United States or one of 20 countries with a free trade agreement with the U.S.At least 50% of the vehicle’s battery components must be manufactured or assembled in North America.
In addition to these, the vehicle has to meet certain price restrictions. For vans, SUVs, and pickup trucks, the manufacturer’s suggested price cannot exceed $80,000, while other vehicles have a price cap of $55,000. For pre-owned EVs to qualify, the price cannot exceed $25,000 and the model year must be at least two years prior to the date of your purchase.
As far as individual models go, The Ascent’s research team has identified 14 EVs that qualify for the full $7,500:
And the following eight models qualify for a $3,750 tax credit:
Even if your preferred EV model isn’t on this list, you might be able to use a tax credit loophole to persuade your EV dealership to reduce your lease payments by $7,500.
Keep in mind these vehicles qualify for a tax credit, meaning you can shave $3,750 or $7,500 off federal taxes that you owe. For instance, if you owe $5,000 on your federal tax bill, you can apply the entire $7,500 tax credit. Unfortunately, the tax credit is nonrefundable, meaning you wouldn’t receive any portion of your $7,500 as a tax refund. In this case, your $7,500 would reduce your $5,000 tax bill to $0, but you wouldn’t get $2,500 as a refund.
In addition to these, your state may offer a rebate for eligible EV purchases. To find out if your state is one of the 41 that offers a rebate (spoiler: the District of Columbia does), look for your state in The Ascent’s guide on electric vehicle tax credits and rebates.
Does every taxpayer qualify?
The IRS has placed income restrictions on the Clean Vehicle tax credit. For those purchasing new EVs, you can qualify for the tax credit if your income is below the following thresholds:
Given the high sticker prices on most electric vehicles, many of us need this tax credit to truly afford an EV. But understanding which EVs qualify is only part of the battle. You could also save money by shopping around for auto loans at the best rates. Even cutting your APR by a few dozen basis points could translate into thousands saved over a long period, which is almost as much as you’ll save with the tax credit.
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The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
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