Which electric vehicles qualify for federal incentives?

The 2022 Inflation Reduction Act (IRA) drastically changed the incentives available for electric vehicles. While there are many great new opportunities for electric vehicle (EV) incentives, the details can be challenging to follow. In this article, we'll explain what you need to know about which EVs qualify for incentives now and in the coming years.

The IRA updated the Qualified Plug-in Electric Drive Motor Vehicle Credit, now known as the Clean Vehicle Credit. Two critical new requirements impact an EV's eligibility, which went into effect at different points:

1. Production location: the final vehicle assembly must now be in North America. This requirement took effect immediately when the IRA passed on August 17, 2022. Additional manufacturing requirements come into play later.

2. Vehicle pricing: vans, SUVs, and pickup trucks must have a manufacturer-suggested retail price (MSRP) at or below $80,000. All other vehicles (e.g., sedans and compact cars) can't have an MSRP above $55,000. This piece of the Clean Vehicle Credit went into effect on January 1, 2023.

According to the IRS list of qualified clean vehicles for 2023, the following EVs and plug-in hybrid vehicles (PHEVs) may currently be eligible for the Clean Vehicle Credit:

• 2023 Audi Q5 TFSI e Quattro PHEV

• 2021, 2022, and 2023 BMW 330e

• 2021, 2022, and 2023 BMW X5 xDrive45e

• 2022 and 2023 Ford Escape PHEV

• 2022 and 2023 Ford E-Transit

• 2022 and 2023 Ford F-150 Lightning

• 2022 and 2023 Ford Mustang Mach-E

• 2022 and 2023 Lincoln Aviator Grand Touring

• 2022 and 2023 Lincoln Corsair Grand Touring

• 2022 and 2023 Chevrolet Bolt

• 2022 and 2023 Chevrolet Bolt EUV

• 2022 and 2023 Cadillac Lyriq

• 2021, 2022, and 2023 Nissan Leaf S

• 2021 and 2022 Nissan Leaf S Plus, SL Plus, SV, and SV Plus

• 2022 and 2023 Rivian R1S

• 2022 and 2023 Rivian R1T

• 2022 and 2023 Chrysler Pacifica PHEV

• 2022 and 2023 Jeep Wrangler 4xe

• 2022 and 2023 Jeep Grand Cherokee 4xe

• 2022 and 2023 Tesla Model 3 RWD, Long Range, and Performance

• 2022 and 2023 Tesla Model Y - all models

• 2023 Volkswagen ID.4, Pro, S, Pro S, AWD Pro, and AWD Pro S

You'll still want to confirm the exact manufacturing location – we share below how to do that based on the specific vehicle you're looking to purchase. Other EVs from manufacturers listed above, such as the Audi e-tron, BMW iX, and Mercedes EQS sedan, aren't eligible since they are currently manufactured outside of the U.S.

How to determine if your EV qualifies for incentives

It's important to note that the specific manufacturing location may vary by vehicle model, trim, or specific production date during the model year because some EV models are produced in multiple locations. So, you'll want to confirm the precise manufacturing location of your EV.

The National Highway Traffic Safety Administration (NHTSA), which is part of the U.S. Department of Transportation (DOT), has a decoder tool that allows you to plug in the Vehicle Identification Number (VIN) to determine the vehicle's manufacturing location.

Once you enter the vehicle's VIN, you'll click the blue 'Decode VIN' button:

You'll receive a summary of the vehicle's information. Near the bottom of the 'Other information' box, you'll see the 'Plant information' listed:

If the plant location is in North America, it meets the initial manufacturing requirement of the Clean Vehicle Credit. If it's outside of North America, it's not eligible. In the above example, this Audi e-tron is shown as being manufactured in Brussels, Belgium, so it isn't eligible for the Clean Vehicle Credit.

How might some vehicles qualify for EV incentives in the future?

Many manufacturers are building plants in the U.S. For example, Hyundai broke ground on a manufacturing facility in Savannah, Georgia, in October 2022, so their vehicles may be eligible in the future. Additionally, South Korean officials report that they are negotiating with U.S. officials as Hyundai contends that the IRA is unfair because South Korea has a free trade agreement with the U.S. We'll have to see how any adjustments to the law play out as well as which vehicle manufacturers pivot to U.S.-based production over the next few years.

Other factors to note when determining eligibility for EV incentives include the purchase date, your income, past EV incentive claims, and whether the vehicle is new or used.

Purchase date

When the IRA passed on August 17, 2022, some components of the Clean Vehicle Credit were implemented immediately, while other requirements will roll out over time. Here's a summary of how your EV's purchase date determines eligibility:

Current

EVs purchased from January 1, 2023, through approximately March 2023*

Credit amounts: $2,500 – $7,500

Key factors to note:

• The amount of credit is still based on the vehicle's battery capacity and weight

• Expands to include fuel cell electric vehicles (FCEVs) and EVs

• Removes manufacturer sales cap (Tesla, GM, and Ford vehicles are now eligible again)

• Final assembly of the vehicle must take place in North America

Details: essentially, the guidelines are the same as for vehicles purchased before August 17, 2022, with the additional requirement that the final assembly must take place in North America.

Future

EVs purchased between approximately March 2023 to December 31, 2032

Credit amounts: $3,750 or $7,500

Key factors to note:

• Expands to include fuel cell electric vehicles (FCEVs) and EVs

• Removes manufacturer sales cap

• Includes additional battery sourcing and manufacturing requirements

Details: after the U.S. Treasury provides direction (anticipated in March 2023), the Clean Vehicle Credit requires meeting critical mineral requirements to receive a $3,750 tax credit. The additional $3,750 tax credit is based on meeting battery component requirements. So, vehicles meeting the critical mineral and battery component requirements are eligible for a total tax credit of up to $7,500. Below, we'll cover the specific requirements and how they change over time. The timing on these requirements could push to later in 2023 if the Treasury's direction is delayed.

Past

EVs purchased before August 17, 2022

Credit amounts: $2,500 – $7,500

Key factors to note

• The amount of credit is based on the vehicle's battery capacity and weight

• Manufacturer sales cap exists

• You'll still be eligible if you signed a binding contract before the IRA passed.

Details: if you purchased an EV before the IRA passed, you were eligible for the credits based on the Qualified Plug-in Electric Drive Motor Vehicle Credit. You can see the eligible EV credit amounts on the IRS website by manufacturer, year, and model. According to the U.S. Department of Energy (DOE), the criteria for the Qualified Plug-in Electric Drive Motor Vehicle Credit includes the following vehicle requirements:

• Uses a traction battery that has at least four kilowatt-hours (kWh) of capacity

• Uses an external source of energy to recharge the battery

• Has a gross vehicle weight rating of up to 14,000 pounds and meets specified emission standards

The available credit ranges from $2,500 to $7,500, with a specific amount based on the vehicle's battery capacity and weight. Additionally, the tax credit was phased out in the second quarter after a manufacturer sold a minimum of 200,000 qualified plug-in vehicles (PEVs).

You could also lock in this credit if you signed a written binding contract to purchase a new qualifying EV before August 16, 2022, even if you don't take possession of it or finalize the purchase until after the IRA passed.

EVs purchased from August 17, 2022, to December 31, 2022

Credit amounts: $2,500 – $7,500

Key factors to note:

• The amount of credit is based on the vehicle's battery capacity and weight

• Manufacturer sales cap still exists

• Final assembly of the vehicle must take place in North America

Details: essentially, the guidelines are the same as for vehicles purchased before August 17, 2022, with the additional requirement that the final assembly must take place in North America.

Income

In addition to determining if the EV you're looking to buy qualifies for incentives, beginning in 2023, your income will also determine your eligibility. The IRA added an income-based component that rolled out on January 1, 2023, so if your income is above a certain amount, you may not be able to claim an EV incentive, regardless of if the EV itself you're buying is eligible.

Eligibility is based on your modified adjusted gross income (MAGI). You're not eligible for the Clean Vehicle Credit if your income is above these thresholds when you file your taxes:

• Married/joint income limit: $300,000

• Head of the household income limit: $225,000

• Single income limit: $150,000

Pricing

As mentioned above, beginning January 1, 2023, there will be a price cap to receive the Clean Vehicle Credit. The MSRP cap for cars is $55,000, while vans, SUVs, and pickup trucks can't be priced above $80,000.

Used vehicles

The IRA adds EV incentives for some used vehicles – but not every used EV will qualify. For a used EV to qualify for a 30 percent credit of the sale price (up to $4,000), the vehicle must:

• Be at least two years earlier than the calendar year in which you're buying it

• Cost less than $25,000

• Be the first time it's being sold as a used vehicle

• Be purchased for use by the person claiming the credit (not for resale)

The used vehicle credit also has different income requirements than the new vehicle version – maximum MAGI (income limits) are:

• Married/joint income limit: $150,000

• Head of the household income limit: $112,500

• Single income limit: $75,000

Like many tax incentives, there are changes to eligibility guidelines that roll out over subsequent years that will be clarified sometime in 2023 (currently anticipated in March, but this could adjust depending on when the U.S. Treasury provides direction on it). We mentioned previously that there would be increasingly stringent requirements regarding where an EV's battery and the vehicle are produced. These requirements are intended to help encourage manufacturers to make batteries and EVs in the U.S. Before the detailed guidelines are released later in 2023, the 2023-specific requirements will not be enforced. We break down the details based on the critical mineral and battery requirements:

Critical mineral requirements

For a vehicle to meet the critical minerals portion of the tax credit ($3,750), a certain percentage of the critical minerals extracted or processed to make the vehicle's battery must be in the U.S., a U.S. free-trade agreement partner, or recycled in North America. The percentages increase over time:

Source: Alternative Fuels Data Center, U.S. DOE

Battery component requirements

To qualify for the battery components portion of the tax credit (and get an additional $3,750), the value of the battery's components that are manufactured or assembled in North America must meet the following percentage requirements:

Source: Alternative Fuels Data Center, U.S. DOE

In addition to the federal EV incentives available through the Clean Vehicle Credit, you may have state or local EV incentives depending on where you live. Check to see what state-specific EV rebates and incentives are available. Also, as part of the IRA, you can claim 30 percent of the costs to install a home EV charger (up to $1,000). Read more about home EV charger incentives.

There are many ways to save on EV charging costs over time, such as taking advantage of special rates like time-of-use rates or off-peak charging programs with your utility company. Going solar is one of the best long-term solutions to lower your home EV charging costs. You can use the EnergySage Marketplace to compare several quotes from pre-screened installers, helping you find a system that fits your needs at the right price. If you're planning to charge an EV at home, make sure to add a note to your profile so installers can right-size your solar energy system to sufficiently power your EV.