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Which Cars Are Eligible for the $7,500 EV Tax Credit in the Inflation Reduction Act?

As the world grapples with the critical issues facing our climate, many leaders around the globe are implementing new incentives to help promote green energy. Often, the high cost of transitioning away from fossil fuels to green energy has been limiting for those with constrained budgets.

For this reason, new incentives are being put into place that will help fund the purchase of green energy solutions. Much of the current consumer focus is on transitioning away from internal combustion engine (ICE) vehicles to electric vehicles (EVs).

In the United States, the Inflation Reduction Act (IRA), which was passed on August 16, 2022, aims to provide new tax credits for those interested in buying an EV. If you are one of the many concerned citizens of the planet who are looking for new ways to invest in a carbon-free lifestyle, these new EV incentives could help you transition toward a greener life.

Let’s take a look at what cars are eligible for the EV tax credit, what it provides you, and how you can use this to help cover EV costs.

Understanding the EV Tax Credit for New and Used Vehicles

Known as the Clean Vehicle Credit, the latest EV incentive helps fund the purchase of both new and used vehicles. Starting January 1, 2023, the Clean Vehicle Credit goes into effect and provides buyers with eligibility for a total of $7,500 in tax credit for the purchase of a new EV.

Note that new stipulations have been put into place with the passing of this EV incentive:

  1. The incentive is split into two equal parts, each worth $3,750. To be eligible for one-half of the credit, the EV battery components had to be manufactured or assembled in North America. To receive the second half, the EV must meet specific criteria around how much of the battery’s critical minerals were extracted or processed in the United States or a U.S. free-trade agreement partner. Additionally, EVs that use critical minerals recycled in North America can qualify for the second half of the $7,500 tax credit.
  2. In order for any vehicle to be eligible, final assembly must take place in North America.
  3. New EV purchases must be under $55,000 for cars or under $80,000 for SUVs, vans, and pickup trucks in order to be eligible for the rebate.

One of the best parts about the new IRA EV incentive is that it also allows buyers to earn credit towards a used EV. The used EV incentive is worth $4,000 or up to 30% of the vehicle’s price. In order to meet used EV requirements, the EV must be:

  • Under $25,000
  • At least two years old
  • Sold by a dealer

What is also great about this new EV tax credit is that, unlike the previous tax credits, consumers don’t need to wait until they file taxes to take advantage of the rebate. When you purchase your vehicle, you’ll receive the credit immediately. This is hugely beneficial for consumers who are concerned about taking out large amounts of financing for a vehicle. In the past, you would have financed the total purchase amount and waited for the rebate when you filed taxes. Now, you receive the money toward your purchase immediately.

What Vehicles Are Eligible for the EV Tax Credit?

While the new EV tax credit has opened up a lot more possibilities for consumers interested in buying an EV, it does come with some stipulations around the way in which a vehicle was manufactured and where the critical minerals for the vehicle’s battery were sourced.

Under these new stipulations, any EV that was not assembled in North America — e.g., the United States, Mexico, or Canada — does not qualify for the rebate, and vehicles that are utilizing critical minerals from certain areas of the world will not qualify. While some manufacturers will struggle to meet these new requirements, such as Tesla, which relies heavily on China for production, the good news is that many U.S. car-makers are rising to the occasion, providing quality options for consumers.

These regulations can, honestly, be a bit confusing. As a consumer, you might not be sure what vehicles will meet the new guidelines.

However, don’t sweat it. The U.S. Department of Energy has compiled a list of 2022 and 2023 EVS that meet the new guidelines. This data is based on the Fuel Economy labeling information and part data submitted by manufacturers to the U.S. Environmental Protection Agency and National Highway Traffic Safety Administration (NHTSA).

Keep in mind that this list is just the initial attempt at identifying what vehicles are eligible for the Clean Vehicle Credit. More vehicles will likely be added to the list as manufacturers are incentivized to meet the newest requirements.

Model YearVehicleNote
2022Audi Q5 
2022BMW 330e 
2022BMW X5 xDrive45e (PHEV) 
2022Chevrolet Bolt EUVManufacturer sales cap met*
2022Chevrolet Bolt EVManufacturer sales cap met
2022Chrysler Pacifica PHEV 
2022Ford E-Transit 
2022Ford Escape PHEV 
2022Ford F-150 Lightning 
2022Ford Mustang MACH E 
2022GMC Hummer EV PickupManufacturer sales cap met
2022GMC Hummer EV SUVManufacturer sales cap met
2022Jeep Grand Cherokee 4xe 
2022Jeep Wrangler 4xe 
2022Lincoln Aviator PHEV 
2022Lincoln Corsair PHEV 
2022Lucid Air 
2022Nissan Leaf 
2022Rivian EDV 
2022Rivian R1S 
2022Rivian R1T 
2022Tesla Model 3Manufacturer sales cap met
2022Tesla Model SManufacturer sales cap met
2022Tesla Model XManufacturer sales cap met
2022Tesla Model YManufacturer sales cap met
2022Volvo S60 Recharge 
   
2023BMW 330e 
2023BMW X5 xDrive45e (PHEV) 
2023Cadillac LyriqManufacturer sales cap met
2023Chevrolet Bolt EVManufacturer sales cap met
2023Ford E-Transit 
2023Jeep Grand Cherokee 4xe 
2023Jeep Wrangler 4xe 
2023Lincoln Aviator PHEV 
2023Lucid Air 
2023Mercedes EQS SUV 
2023Nissan Leaf 
2023Rivian R1S 
2023Rivian R1T 
2023Tesla Model 3Manufacturer sales cap met
2023Tesla Model SManufacturer sales cap met
2023Tesla Model XManufacturer sales cap met
2023Tesla Model YManufacturer sales cap met
2023Volkswagen ID.4 

Source: This chart is provided by the U.S. Department of Energy. For the most up-to-date list, visit: https://afdc.energy.gov/laws/electric-vehicles-for-tax-credit

*Some manufacturers with vehicles assembled in North America have reached a cap of 200,000 EV credits and are, therefore, not currently eligible for the Clean Vehicle Credit.

The Future Is Bright for EVs

The latest EV tax credit is a welcomed update to U.S. EV incentives. This new EV tax credit is opening doors for those who are seeking a more sustainable lifestyle. Not only that, but it is also increasing the incentive for vehicle makers to make the transition away from ICE vehicles to EVs.

As manufacturers continue to see the financial benefits of making this change, consumers will benefit from an increasing number of options on the market. We expect to see the above list continue to grow in size as vehicle makers adjust their processes, bringing more jobs to the United States and boosting our economy through green energy. That is truly a win for all.

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By evee Life Contributor

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