Looking to take advantage of the federal tax credits for new and used EVs, but aren’t sure how, or which models qualify? Here is everything you need to know.
On August 7th, 2022, the U.S. Senate passed the landmark Inflation Reduction Act. This far-reaching bill looks to take on climate change, in part, by incentivizing electric vehicles and solar.
For anyone looking to buy an electric vehicle (EV), though, the big news is that the bill offers tax credits up to $7,500 for new EVs and $4,000 for used EVs through to 2032.
In this post, we break down the small print to figure out which EVs qualify for the Federal EV Tax Credit, AKA the Clean Vehicle Credit in 2024.
When you can claim the tax credit (and when you can’t)
To claim the EV tax credit there are EV price limits, income limits, and manufacturing criteria that all must be met.
First, the good news for anyone wanting to buy an EV:
- The bill extends EV tax credits for ten years, until 2032
- The 200,000 sales cap on vehicles was scrapped on January 1, 2023, putting popular Tesla and GM models back in the game for EV credits
- From 2024 onwards, you can claim the tax credit at the dealership, lowering your upfront cost to buy an EV
- The tax credit applies to used EVs, letting you reclaim up to $4,000 or 30% of the purchase price on used EVs costing $25,000 or less
- The program includes tax credits for plug-in hybrids with a battery of 7 kWh capacity or greater.
From January 1, 2024, your Clean Vehicle Tax Credits must be initiated and approved at the time of sale, i.e., at the dealership. Make sure to get a copy of the IRS’s confirmation of a “time-of-sale” report submitted successfully by the dealer.
Now for the bad news. Under the new rules, you can only claim the EV tax credit if:
- You buy an EV priced at $55,000 or less, or buy an SUV or light truck priced at $80,000 or less (from January 1, 2023)
- Your modified adjusted gross income in the year of purchase or preceding year is no more than:
- $150,000 if filing singly
- $225,000 for a head of household
- $300,000 if you’re filing jointly.
To take full advantage of the EV tax credit, you probably need to make at least $66,000 in the year of purchase. Otherwise, your tax burden is likely to be too low to claim the full $7,500.
To claim the used EV tax credit, the purchaser’s income is limited to:
- $75,000 for a single filer
- $112,500 for a head of household
- $150,000 for joint filers.
Other eligibility requirements
We get into the weeds about batteries and critical minerals below, but the TLDR is that EVs and PHEVs are also only eligible if:
- The EV is assembled in North America, which for the bill’s purposes includes Mexico, the U.S., and Canada (effective immediately)
- At least 60% of the EV’s battery is assembled in or made from materials sourced in North America
- At least 40% of the “critical minerals content” comes from U.S. sources, is recycled in North America, or comes from a country with a free trade agreement with the U.S. (originally slated to take effect January 1, 2023, this is now set to come in sometime in March, 2023, after which there will be annual increases in minimum content requirements).
For 2024, vehicles are only eligible if they don’t contain any battery components manufactured by a foreign entity of concern. For 2025, eligible vehicles can’t contain any critical minerals extracted, processed, or recycled by a foreign entity of concern.
Which EVs are likely eligible for the tax credit?
EV tax credits have gotten a lot more complicated in recent years. But while only a handful of EVs (around 22) initially qualified for at least some of the credit, many more are now eligible.
The following EVs qualify for at least part of the tax credit, based on where they’re manufactured and how they’re made:
Acura
| Make | Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit |
|---|---|---|---|---|---|
 | ZDX | 2024 | EV | $7,500 | $80,000 |
Audi
| Make | Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit |
|---|---|---|---|---|---|
 | Q5 PHEV 55 TFSI e quattro | 2023–2024 | PHEV | $3,750 | $80,000 |
| Q5 S Line 55 TFSI e quattro | 2023–2024 | PHEV | $3,750 | $80,000 |
Cadillac
The Cadillac Lyriq is made in America with GM’s Ultium batteries.
| Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit | |
|---|---|---|---|---|---|
 | LYRIQ | 2024 | EV | $7,500 | $80,000 |
Chevrolet
Chevy makes the Bolt, Blazer, Equinox, and Silverado in America, using Ultima batteries.
| Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit | |
|---|---|---|---|---|---|
 | Blazer EV | 2024 | EV | $7,500 | $80,000 |
 | Bolt EUV | 2022–2023 | EV | $7,500 | $55,000 |
 | Bolt EV | 2022–2023 | EV | $7,500 | $55,000 |
 | Equinox EV | 2024 | EV | $7,500 | $80,000 |
Chrysler
| Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit | |
|---|---|---|---|---|---|
 | Pacifica PHEV | 2022–2024 | PHEV | $7,500 | $80,000 |
Ford
| Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit | |
|---|---|---|---|---|---|
 | Escape Plug-in Hybrid | 2022–2024 | PHEV | $3,750 | $80,000 |
 | F-150 Lightning (Extended Range Battery) | 2022–2024 | EV | $7,500 | $80,000 |
| F-150 Lightning (Standard Range Battery) | 2022–2024 | EV | $7,500 | $80,000 |
Honda
The Honda Prologue is made by GM in America using Ultium batteries.
| Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit | |
|---|---|---|---|---|---|
 | Prologue | 2024 | EV | $7,500 | $80,000 |
Jeep
| Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit | |
|---|---|---|---|---|---|
 | Grand Cherokee PHEV 4xe | 2022–2024 | PHEV | $3,750 | $80,000 |
 | Wrangler PHEV 4xe | 2022–2024 | PHEV | $3,750 | $80,000 |
Lincoln
| Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit | |
|---|---|---|---|---|---|
 | Corsair Grand Touring | 2022–2024 | PHEV | $3,750 | $80,000 |
Nissan
Nissan is still making the Leaf in Tennessee, despite rumors that this beloved EV is destined for retirement.
| Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit | |
|---|---|---|---|---|---|
 | LEAF S | 2024 | EV | $3,750 | $55,000 |
 | LEAF SV PLUS | 2024 | EV | $3,750 | $55,000 |
Rivian
| Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit | |
|---|---|---|---|---|---|
 | R1S Dual Large | 2023–2024 | EV | $3,750 | $80,000 |
| R1S Dual Standard | 2024 | EV | $3,750 | $80,000 |
| R1S Dual Standard+ | 2024 | EV | $3,750 | $80,000 |
| R1S Performance Dual Standard+ | 2024 | EV | $3,750 | $80,000 |
| R1S Quad Large | 2022–2024 | EV | $3,750 | $80,000 |
 | R1T Dual Large | 2023–2024 | EV | $3,750 | $80,000 |
| R1T Dual Max | 2023–2024 | EV | $3,750 | $80,000 |
| R1T Dual Performance Large | 2023 | EV | $3,750 | $80,000 |
| R1T Dual Standard | 2024 | EV | $3,750 | $80,000 |
| R1T Dual Standard+ | 2024 | EV | $3,750 | $80,000 |
| R1T Performance Dual Standard+ | 2024 | EV | $3,750 | $80,000 |
| R1T Quad Large | 2022–2024 | EV | $3,750 | $80,000 |
Tesla
The Model 3 is built in Fremont, CA, and the Tesla Model Y is made in Texas and California, using batteries made in the U.S.
| Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit | |
|---|---|---|---|---|---|
 | Model 3 Performance | 2023–2024 | EV | $7,500 | $55,000 |
 | Model X Long Range | 2023–2024 | EV | $7,500 | $80,000 |
 | Model Y All-Wheel Drive | 2023–2024 | EV | $7,500 | $80,000 |
| Model Y Long Range Rear-Wheel Drive | 2024 | EV | $7,500 | $80,000 |
| Model Y Performance | 2023–2024 | EV | $7,500 | $80,000 |
| Model Y Rear-Wheel Drive | 2024 | EV | $7,500 | $80,000 |
Volkswagen
Some ID.4s are assembled in Tennessee, using batteries made in Georgia, making them eligible for the full tax credit.
| Model | Model Year | Vehicle Type | Credit Amount | MSRP Limit | |
|---|---|---|---|---|---|
 | ID.4 AWD PRO | 2023–2024 | EV | $7,500 | $80,000 |
 | ID.4 AWD PRO S | 2023–2024 | EV | $7,500 | $80,000 |
| ID.4 AWD PRO S PLUS | 2023–2024 | EV | $7,500 | $80,000 |
| ID.4 PRO | 2023–2024 | EV | $7,500 | $80,000 |
| ID.4 PRO S | 2023–2024 | EV | $7,500 | $80,000 |
| ID.4 PRO S PLUS | 2023–2024 | EV | $7,500 | $80,000 |
 | ID.4 S | 2023–2024 | EV | $7,500 | $80,000 |
 | ID.4 STANDARD | 2023–2024 | EV | $7,500 | $80,000 |
Affordable EVs prioritized
The new rules have been designed to incentivize affordable EVs, though, which means there are new restrictions on the cost of eligible vehicles.
To qualify for the tax credit, the manufacturer’s suggested retail price (MSRP) must be no more than $55,000 for a standard EV, or $80,000 for an electric Sports Utility Vehicle (SUV) or light truck.
You may miss out if you buy an EV for $55,000 that was discounted from the MSRP $60,000.
Used EVs now qualify for the Federal EV Tax Credit
From 2023, used EVs also qualify for a tax credit. This is worth up to $4,000 or 30% of the purchase price of a used EV that costs $25,000 or less.
The credit is only available for the first sale of a used vehicle and the car must be more than two years old. Under the new rules, you can only claim the tax credit once every three years.
Income limits for purchasers of used EVs mean you can only claim the tax credit if your income in the year of purchase or the preceding year is:
- $75,000 or less for singles
- $112,500 for a head of household
- $150,000 for folks filing jointly or a surviving spouse.
Used EVs don’t have to meet the same criteria regarding battery components and critical mineral sourcing as new EVs.
No more popularity penalty on EVs
The Inflation Reduction Act scraps what some call the ‘popularity penalty’ on EVs. This purchase cap saw tax credits decrease and then end for any brand of car that reached 200,000 sales. Tesla and GM reached that cap years ago, meaning anyone buying EVs from those carmakers couldn’t claim the credit. Toyota and Ford were close to the cap too.
Under current rules, tax credits were reinstated for all carmakers as of January 1, 2023, as long as the EVs meet other eligibility criteria. This removes what had become, in essence, a $7,500 penalty hindering sales of Tesla and GM.
Get your EV tax credit at the dealership!
Perhaps the biggest change to the EV tax credit is the ability to claim the incentive upfront.
Instead of having to recoup the cost come tax-time, consumers can work with a dealership to figure out their likely tax break and knock that off the purchase price at the point of sale. This rule went into effect January 1, 2024.
This is a huge incentive that helps lower the upfront price of an EV, improving affordability for more people. Canada has been using this point-of-sale approach to EV tax credits for many years.
The trouble with the upfront tax credit discount is that you’ll need to be relatively certain of your tax situation for the year in which you purchase the EV.
So far, it’s not clear how the Internal Revenue Service (IRS) will reclaim any overestimated tax credits upon filing, from purchasers who miscalculated at the dealership. If you’re buying an EV early in the financial year, be sure of the math, especially if your EV dealer is leaning heavily on the tax credit as a sales technique.
Non-refundable tax credit
When shopping for a new or used EV, note that the federal tax credit is non-refundable. This means that if you’re eligible for a $2,000 credit but only owe $1,500 in tax, you’ll only receive a $1,500 credit on your return, and no refund. If your tax liability is zero, you will not receive the credit at all, even though you’re otherwise eligible for it.
If the new vehicle is a household purchase, consider which family member has the greater tax liability and have them buy the car in their name to maximize the potential credit. You might also want to think about using the tax credit to withdraw from retirement accounts or move money around your savings without having to pay additional taxes.
There are many factors in play when calculating taxes, and I’m not a U.S. tax accountant, so talk to your financial advisor or accountant to figure out what’s best for your individual circumstances.
Battery component requirement
From March 2023, onwards, the EV tax credit is only be available if a vehicle placed in service before January 1, 2024, has a battery made with at least 50% of its components manufactured or assembled in North America. This percentage increases to:
- 60% for EVs or PHEVs placed into service during 2024 and 2025
- 70% for EVs or PHEVs placed into service during 2026
- 80% for EVs or PHEVs placed into service during 2027
- 90% for EVs or PHEVs placed into service during 2028.
After December 31, 2028, any EV or PHEV placed into service must have 100% of its battery components manufactured or assembled in North America in order for the EV to qualify for the tax credit.
Critical minerals requirements for EV tax credit
To be eligible for the EV tax credit, a car placed into service must have a battery made using the following percentages of critical minerals:
- 50% for a vehicle placed into service in 2024
- 60% for a vehicle placed into service in 2025
- 70% for a vehicle placed into service in 2026
- 80% for a vehicle placed into service after December 31, 2026.
Notably, while the requirements for the percentage of critical minerals in a battery are similar to those for battery components, these requirements can be satisfied by domestic suppliers, countries with a free trade agreement with the U.S., and minerals recycled in North America.
Where do EV batteries come from?
The new rules state that a vehicle won’t qualify for the tax credit if any materials or components (including critical minerals) are sourced from ‘foreign entities of concern’. This includes both Russia and China, which poses a big problem for many automakers as a 2022 analysis from Benchmark Intelligence, which tracks the battery industry, found that China controlled:
- 81% of global cathode manufacturing capacity
- 91% of global anode capacity
- 79% of global lithium-ion battery manufacturing capacity.
Supporting domestic EV and battery production
Both the Inflation Reduction Act and an earlier bill include measures to support the domestic production of batteries and EVs.
- The Infrastructure Investment and Jobs Act of 2021 included $7 billion in grants to accelerate the development of the U.S. battery supply chain.
- There’s also a $3 billion expansion of the Advanced Vehicle Manufacturing Loan Program included in the Inflation Reduction Act.
Materials also qualify under the new rules if they’re recycled in the U.S. Currently, there’s little capacity for recycling EV batteries stateside, but a recycling facility currently being built in Nevada by Redwood Materials aims to supply enough cathode and anode materials to support 1 million EVs by 2025 (it currently recycles enough to support around 60,000 EV batteries). The bulk of EV battery components will still need to come from virgin resources, however, making recycling more of a long-term solution that needs to happen in tandem with more immediate action.
It will take time, though, to build capacity in the domestic EV industry, and part of this will rely on short-term sales. Automakers that satisfy the new criteria have an immediate advantage, with a potential for a spike in sales as competitors play catch-up.