The Inflation Reduction Act (IRA) contains funding for energy programs, including a $7,500 tax credit for electric vehicles (EVs). The law will also provide tax credits for commercial trucks and home charging installations in rural areas. Plus, some used electric vehicles are also eligible for an incentive.
How Much is the EV tax credit?Until recently, only a small number of consumers were benefitting from EV tax credits. Tesla and General Motors are nearing their 200,000 vehicles sales cap and their long-standing tax credits are set to expire, this new federal tax credit came just in time. According to the Alternative Fuels Data Center, approximately 30 models are eligible for up to $7,500 in tax credits, but only if their final assembly takes place in North America and 40 percent of their metals are mined in North America. Of the 30, ten have already reached their manufactures cap. Plus, there is a up to $4,000 incentive on used electric cars. “If you’re interested in an EV or a plug-in hybrid and it qualifies for a tax credit today, don’t wait, because it might not qualify next year,” says Jake Fisher, senior director of Consumer Reports’ Auto Test Center. “But if you’re considering a used EV, it is worth waiting.”
Other EV ProvisionsIn addition to federal tax incentives, the following IRA provisions apply:
- Removes the 200,000-vehicle cap on tax credits that made EVs and plug-in hybrids from Tesla, GM, and Toyota ineligible for tax credits.
- Eradicates today’s tax credits for pricey EVs—such as the GMC Hummer EV, Lucid Air, and Tesla Model S and Model X.
- Eliminates tax credits for vehicles not assembled in North America, including the BMW i4, Hyundai Ioniq 5, Kia EV6, Subaru Solterra, and Toyota bZ4X.
- Adds an annual adjusted gross income cap for buyers of $150,000 for single tax filers; $225,000 for those who file as head of household, and; $300,000 for married couples filing jointly.
- Starting in 2024, if any minerals or components are sourced from “foreign entities of concern,” including China or Russia, the vehicle will not qualify for any tax credit.
Qualifying Vehicles – For NowAccording to the IRS, the models that may qualify for a tax credit, include:
- 2022 Audi Q5 PHEV
- 2022 BMW 3 Series PHEV, BMW X5 PHEV
- 2022 Chrysler Pacifica PHEV
- 2022 Ford Escape PHEV, F-150 Lightning, Mustang Mach-E, Transit Van
- 2022 Jeep Grand Cherokee PHEV, Wrangler 4xe PHEV
- 2022 Lincoln Aviator PHEV, Corsair PHEV
- 2022 Lucid Air
- 2022 Nissan Leaf
- 2022 Rivian R1S, R1T
- 2022 Volvo S60 Recharge PHEV
- 2023 BMW 3 Series PHEV
- 2023 Mercedes-Benz EQS
- 2023 Nissan Leaf
- 2022 Tesla Model 3, Model S, Model X, Model Y (maybe not)
- 2023 Cadillac Lyriq
- 2022 GMC Hummer Pickup/SUV (maybe not)
- 2023 Chevrolet Bolt, Bolt EUV