Electric cars may be becoming more affordable, but they are still not cheap. Many potential buyers rely on the federal electric vehicle (EV) tax credit, which can be up to $7,500, to make purchasing a new car more manageable. However, the federal EV tax credit has seen numerous changes over time and does not last indefinitely. Additionally, many electric cars are not eligible for the credit, which is essential to consider if you are planning to buy an electric vehicle soon.
Wondering if your next car qualifies for the EV tax credit? Here’s the lowdown.
To qualify for the federal EV tax credit, both the vehicle and its manufacturer need to meet several criteria.
To start, buyers can only receive the full $7,500 credit if they purchase a new electric car. Those who buy used electric cars can still get a credit, but it’s capped at $4,000.
There are other specific requirements as well. To be eligible for $3,750 of the credit, 40% of the battery minerals must originate from the U.S. or countries that have a free trade agreement with the U.S. This percentage will increase over time: 60% in 2024, 70% in 2026, 80% in 2027, 90% in 2028, and 100% by 2029. Starting in 2025, cars with any battery minerals or components from countries of concern will be excluded from the credit.
The other half of the credit depends on whether the battery was assembled or manufactured in the U.S. In 2023, 50% of the battery must be U.S.-manufactured, with this requirement rising to 60% in 2024, 70% in 2026, 80% in 2027, 90% in 2028, and 100% by 2029.
There is also a price cap that varies based on vehicle type. Trucks, vans, and SUVs must cost no more than $80,000, while all other cars must be priced at $55,000 or less.
Income limits apply too. Buyers can use their modified adjusted gross income from either the year the car is delivered or the previous year. For new cars, single filers must not exceed $150,000, heads of households must stay under $225,000, and married couples filing jointly must not exceed $300,000. For married couples filing separately, the limit is $150,000. These figures are halved for buyers of used EVs.
It’s important to note that the credit you receive depends on your income tax liability for the year. For instance, if you owe $2,000 in taxes and buy a qualifying vehicle, you’ll only get a $2,000 credit. The rest will not carry over to a refund or next year’s taxes. If you don’t owe any taxes, you won’t receive any credit.
While we can’t help you determine if your income qualifies you for the EV tax credit, we can assist in identifying which cars are eligible. Here’s a list of cars that qualified for the federal tax credit at the time of writing. Keep in mind the MSRP limits; many of these vehicles might exceed the price cap if you opt for higher trim levels or additional upgrades. This list may change, so it’s worth checking fueleconomy.gov to ensure your chosen car still qualifies.
BMW
Cadillac
Chevrolet
Chrysler
Ford
Jeep
Lincoln
Rivian
Tesla
Volkswagen