As sales of electric vehicles continue to surge, many new and prospective customers have questions about qualifying for federal tax credit on electric vehicles, especially now that a slew of new credits have been reinstated to US consumers (alongside their fair share of confusing and ever-evolving conditions)
Whether you qualify is not a simple yes or no question… well, actually it sort of is, but the amount you may qualify for varies by household due to a number of different factors. Furthermore, new terms implemented January 1, 2023 limit the number of EVs that currently qualify based on a number of factors pertaining to local US manufacturing.
Lastly, there are other potential savings available to you that you might not even know about yet. Luckily, we have compiled everything you need to know about tax credits for your new or current electric vehicle into one place. The goal is to help ensure you are receiving the maximum value on your carbon-conscious investment because, let’s face it, you’ve gone green and you deserve it.
Table of contents
How does a federal tax credit work for my EV?
The idea in theory is quite simple, per the IRS – “You may qualify for a credit up to $7,500 under Internal Revenue Code Section 30D if you buy a new, qualified plug-in EV or fuel cell electric vehicle (FCV). The Inflation Reduction Act of 2022 changed the rules for this credit for vehicles purchased from 2023 to 2032.
With that said, you cannot simply go out and buy an electric vehicle and expect Uncle Sam to cut $7,500 off your taxes in April. In reality, the amount you qualify for is based on both your income tax as well as several specifications of the electric vehicle you purchase, including where it’s built. More on that below.
First, let’s take a second to truly understand how the Federal EV tax credit currently works.
How much is the federal tax credit?
First and foremost, it’s important to understand three little words the government slips in front of the $7,500 credit – “may” and “up to.” As in, you may qualify for up to $7,500 in federal tax credit for your electric vehicle. At first glance, this credit may sound like a simple flat rate, but that is unfortunately not the case.
For example, if you purchased a Ford F-150 Lightning and owed say, $3,500 in income tax this year, then that is the federal tax credit you would receive. If you owed $10,000 in federal income tax, then you would qualify for the full $7,500 credit.
It’s important to note that any unused portion of the $7,500 is not available as a refund, nor as a credit for next year’s taxes. Bummer.
A quick history lesson on the expansion of EV tax credits
At the time, there were rumors that the federal tax credit would be increased to $10,000 and was quickly mentioned as a reform. The second, larger bill sat within Biden’s “Build Back Better Act” and subsequent offered increases to the federal tax credit, but it couldn’t get past the Senate in late 2021.
The revamped tax credit then sat in federal purgatory, until this past summer late July 2022 when the US Senate shared it was moving forward to vote on EV tax credit reform after Senator Joe Manchin (D-WV) finally agreed to include investments to curb climate change.
On August 7, 2022, it was approved by the Senate and a week later signed into law by President Biden. This revamped “Clean Vehicle Credit” under the Inflation Reduction Act, not only extends the length of EV tax benefits through the next decade, but also eliminates the unit threshold that some American automakers have already exhausted, thus disqualifying themselves. GM and Tesla customers rejoice! You can now join the EV tax credit party again.
Now that we are officially into 2023, the reform bill now applies to EVs purchased and delivered after December 31, 2022. Below is a breakdown of the terms of the new Clean Vehicle Credit, but be warned. Just because it’s now being implemented does not mean the US government has all of its ducks in a row yet.
These are the current qualifying terms as laid out in the IRA, however, we’ve explained how some of these requirements, in particular battery manufacturing in the US, are not currently being enforced. More on that below.
New Federal Tax Credits in the Inflation Reduction Act
Federal tax credit for EVs will remain at $7,500
Timeline to qualify is extended a decade from January 2023 to December 2032
Tax credit cap for automakers after they hit 200,000 EVs sold is eliminated, making GM, Tesla, and Toyota once again eligible
The language in the bill indicates that the tax credit could be implemented at the point of sale instead of on taxes at the end of the fiscal year
That means you can get your credit up front at the dealer, but these terms may not kick in until 2024
In order to get the full tax credit, the EV must be assembles in North America and…
Two binary pieces separate the full $7,500 credit meaning the vehicle either qualifies for each piece of the credit or it doesn’t
The other $3,750 of the new credit is based on at least 50% of the battery components of the vehicle coming from the United States or countries with a free trade agreement with the US
Note – these battery requirements are now being enforced as April 18, 2023. More below.
The 40% minerals requirement increases to 50% in 2024, 60% in 2025, 70% in 2026 and 80% in 2027
The 50% battery components requirement increases to 60% in 2024, 70% in 2026, 80% in 2027, 90% in 2028 and 100% in 2029
Beginning in 2025, any vehicle with battery minerals or components from a foreign entity of concern are excluded from the tax credit
Qualifying EVs must also have a battery size of at least 7 kWh and a gross vehicle weight rating less than 14,000 pounds
New federal tax credit of $4,000 for used EVs priced below $25k
Subject to other requirements like lower annual income (see below)
Revised credit applies to battery electric vehicles with an MSRP below $55,000
Also includes zero-emission vans, SUVs, and trucks with MSRPs up to $80,000
New credit also expands to commercial fleet customers
Includes separate qualifications and limits
The federal EV tax credit will be available to individuals reporting adjusted gross incomes of $150,000 or less, $225,000 for heads of households, or $300,000 for joint filers
The new credit will also continue to apply to Plug-in Hybrid EVs (PHEVs) as long as they meet the same requirements outlined above
Revampedused vehicle credit
Used EVs also got revised terms that now offers a credit equal to 30% percent of the sale price (up to $4,000). That should help consumers like yourselves get some change back in your pocket at the end of the fiscal year. As long as you stick to these terms as outlined by the IRS.
To qualify as a customer, you must:
Be an individual who bought the vehicle for use and not for resale
Not be the original owner
Not be claimed as a dependent on another person’s tax return
Not have claimed another used clean vehicle credit in the three years before the EV purchase date
Modified adjusted gross income must not exceed $75k for individuals, $112,500 for heads of households, and $150k for joint returns
For the used EV to qualify for federal tax credits, it must:
Have a sale price of $25,000 or less
Have a model year at least two years earlier than the calendar year when you buy it
For example, a vehicle purchased in 2023 would need a model year of 2021 or older
Not have already been transferred after August 16, 2022, to a qualified buyer
Have a gross vehicle weight rating of less than 14,000 pounds
Be an eligible FCV or plug-in EV with a battery capacity of least 7 kilowatt hours (kWh)
Be for use primarily in the United States
You buy the vehicle from a dealer
For qualified used EVs, the dealer reports required information to you at the time of sale and to the IRS
Purchaser must be an individual (no businesses) to qualify for used credit
A used vehicle qualifies for tax credit only once in its lifetime
The Fisker Ocean, starting at an MSRP of $37,499 / Source: Fisker Inc.
What electric vehicles could qualify for tax credit as of January 1, 2023?
Alright, this is probably the main reason why you’re here. If you scrolled through the details above, you may want to consider going back and at least skimming, because there are some major changes to federal tax credits to electric vehicles under the Inflation Reduction Act.
Following a revision by the IRS, the US department of Treasury delayed its battery guidance pertaining to what EV manufactures need to build in the US for their vehicles to qualify. Although the department was given a deadline of December 2022 to deliver this guidance, it relayed that it neededd more time, at least until March of 2023.
As a result, the qualifying factors mentioned above that pertain to battery component assembly and materials being sourced and built in North America are not being enforced… at least not until April 18, 2023. Just recently, the US Department of Treasury has finally shared its battery guidance for qualifying EVs, here’s the latest
Battery guidance update as of April 2023
Following a near four month delay, the US government has shared its guidance as to what parameters surrounding battery component assembly and their respective materials will be required for a given EV to still qualify for federal tax credits.
Now, EV manufacturers must ensure that battery critical minerals used in vehicles assembled in America are also “extracted or processed in the US or any country with which the US has a free trade agreement,” or recycled in North America. Like the EV themselves, battery components must also be “manufactured or assembled in North America.”
To date, the following countries are recognized by local government as US free trade partners: Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, Singapore, and Japan.
In addition to the new trade agreement with Japan, the US is in talks with the EU to enact a similar agreement so more EVs from from automakers across the pond eventually qualify… even if they are simultaneously investing time and money into arguably obsolete technology like carbon-neutral combustion cars.
Each of the two newly enforced qualifying factors account for $3,750 in tax credits, combining for the total $7,500. Additionally, each of the battery factors contain an “applicable percentage” based on the year the vehicle is placed into service. Rather than basing an EV’s qualifications on factors like battery weight or capacity like in years past, the new process measures the overall value of each component or mineral used in the battery supply chain.
Not sure if your prospective EV purchase qualifies? We can’t blame you. Here’s a handy flowchart we made to help (hopefully) simplify the details for you.
Credit: Electrek
Another important factor to take note of in the Treasury’s battery guidance is that after 2024, batteries must contain zero components manufactured or assembled by a foreign entity of concern (FEOC). After, no critical minerals can be extracted, processed, or recycled by an FEOC. The Us government has yet to share a specific list of FEOCs, but the Dept. of Treasury has once again vowed to deliver those details before year’s end.
The battery guidance currently sits as a proposed rule that has been published in the federal register, leaving the door open for public feedback until June 16, 2023 before taking its final form. Still, the proposed qualifying factors are in effect as of April 18, 2023 while the finalized iteration is solidified. Any future changes are expected to be minor, but we will be sure to keep you in the know,
Under the terms mentioned above, these are the EVs that could qualify for the some for of the federal EV tax credit. Notice several previously qualifying models have been struck through per the guidance of the US Treasury as of April 18, 2023.
Other tax credits available for electric vehicle owners
So now you should know if your vehicle does in fact qualify for a federal tax credit, and how much you might be able to save.
Find out where an EV is assembled using its VIN
The US Department of Energy offers a VIN decoder tool to confirm where a given EV is assembled. Check it out here.
Check out our complete breakdown of state tax incentives, sorted by state
In additional to any federal credit you may or may not qualify for, there are a number of clean transportation laws, regulations, and funding opportunities available at the state level.
For example, in the state of California, drivers can qualify for a $2,000-$4,500 rebate or a grant up to $5,000 under the Clean Vehicle Assistance Program on top of any federal credit received (all rebate and grant amounts are based on income). These incentives vary by state, and much like the federal tax credit, are contingent on multiple factors.
Want to learn more? Of course you do! Luckily, we’ve compiled each and every state rebate, tax credit, and exemption for you and sorted it by state. Whether its a purchase or lease of a new or used EV, or the purchase and/or installation of an EV charger, you could get money back, depending where you live. Here are all those tax credits, rebates, and exemptions, sorted by state.
Source: Fueleconomy.gov
Tax incentives on electric vehicles are worth the research
Hopefully this post has helped to incentivize you to use the resources above to your advantage.
Whether it’s calculating potential savings or rebates before making a new EV purchase or determining what tax credits might already be available to you for your current electric vehicle, there is much to discover.
Ditching fossil fuels for greener roadways should already feel rewarding, but right now the government is willing to reward you further for your environmental efforts.
Use it to your full capability while you can, because as more and more people start going electric, the less the government will need to reward drivers.
Electric Vehicle (EV) tax credit FAQ
How does the EV tax credit work?
At the federal level, the tax credits for EVs (electric cars, vans, trucks, etc) operates as money back at the end of the fiscal year you purchased or leased your vehicles based on a number of factors.
The awarded credit is up to $7,500 per vehicle, but how much you may get back will depend on the your annual income, whether you are filing with someone else like a spouse, and what electric vehicle you purchased.
For example, if you purchased a Ford Mustang Mach-E and owed $3,500 in income tax this year, then that is the federal tax credit you would receive. If you owed $10,000 in federal income tax, then you could qualify for the full $7,500 credit.
It’s important to note that any unused portion of the $7,500 is not available as a refund, nor as a credit for next year’s taxes.
You may also be able to receive money back right away as a point of sale credit, but those terms probably won’t kick in until 2024 at the earliest.
What electric vehicles qualify for tax credits?
As things currently stand, there is a lot up in the air right now. The first table above details all of the electric vehicles that qualify under terms of the Inflation Reduction Act. However, battery guidance has now been updated has kicked in So this ever-evolving list will continue to change. Be sure to check the date at the bottom of each table above to see when it was most recently updated.
What electric vehicles qualify for the new tax credits starting in 2023?
As previously mentioned, qualifying terms for electric vehicle became more strict with the start of 2023, and EVs and their battery components must be assembled in North America to qualify.
As you can see above, significantly fewer electric vehicles qualify under the new terms, but as time goes on, more and more automakers will adapt their production strategies to operate within North America and start selling vehicles that qualify.
American companies like Ford, GM, and Tesla already have EVs that qualify to some extent, but others are sure to follow. We will continually update the list above as we learn more.
Do hybrids qualify for tax credits?
Excellent question. Since traditional hybrid vehicles rely primarily on combustion and do not use a plug to charge, they do not qualify for tax credits at the federal level. Credits apply to plug-in electric vehicles which includes plug-in hybrid EVs and battery electric vehicles (BEVs).
Do used electric cars qualify for federal tax credits?
Yes! Under revised terms in the inflation reduction act. Used EVs will now qualify in addition to new vehicles as previously stated.
Starting January 1, 2023 qualifying used EVs priced below $25,000 can qualify for up to $4,000 in federal tax credits. There are some terms to note however: – Used vehicle qualifies for tax credit only once in its lifetime. – Purchaser must be an individual (no businesses) to qualify for the used vehicle credit. – Purchaser may only claim one used vehicle credit per three years.
– Used vehicle must be at least two model years old at time of sale. – The original use of the vehicle must have occurred with an individual other than the one claiming the used tax credit. – Used vehicle must be purchased from a dealer. – Gross income cap of $75k for individuals, $112,500 for heads of households, and $150k for joint returns. – Credit may be applied at time of sale by dealer
Are there price caps for electric vehicles to qualify for tax credits?
Yes. Under the new terms in the Inflation reduction act, the MSRP of electric vehicle must be $80,000 or less for SUVs, vans, and trucks. MSRPs for all other electric vehicles must be $55,000 or less.
What are the income limits to qualify for any federal EV tax credits?
Modified adjusted gross income limits are $150,000 for individuals, $225,000 for heads of households, and $300,000 for joint returns. Any reported annual income below these thresholds should qualify you for some level of tax credit, as long as your new purchase is a qualifying electric vehicle.
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Ava Community Energy just rolled out a new program in California that pays EV and plug-in hybrid drivers for charging their cars when electricity on the grid is cleaner and cheaper.
The new Ava SmartHome Charging program, launched in partnership with home energy analytics platform Optiwatt, offers up to $100 in incentives in the first year. And because the program helps shift home charging to lower-cost hours, Ava says drivers could save around $140 a year on their energy bills.
EV and PHEV owners who are Ava customers can download the Optiwatt app for free, connect their vehicle, and let the app handle the rest. The app uses an algorithm to automatically schedule charging when demand is low and more renewable energy is available, typically overnight or during off-peak hours.
“Ava is on a mission to provide 100% clean energy to our customers by 2030,” said CEO Howard Chang. “This new program helps us get there by giving people an easy way to charge on more renewable energy while simultaneously saving money.”
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Drivers who enroll get a $75 bonus for joining, and can earn an extra $25 per year if they stay enrolled. Optiwatt shifts charging to off-peak times, and it takes into account the customer’s individual schedules and preferences.
Casey Donahue, who founded Optiwatt, says this program is a win for everyone. “We can move a lot of energy use to cleaner, more affordable times by using smart algorithms and the growing EV base,” he said. “That benefits every Ava customer.”
The program is available to most EVs and plug-in hybrids. All it takes is signing up through the Optiwatt app (iOS, Android, or web) and completing a quick verification process. Savings and rewards start right away.
The Oakland-based not-for-profit public power provider aims to enroll at least 5,000 vehicles by the end of 2025. The company says this program is the first step in a broader virtual power plant (VPP) strategy. It’s powered by Lunar Energy’s Distributed Energy Resource Management System (DERMS) platform, Gridshare, which will help Ava coordinate energy from EVs, home batteries, and more.
Ava Community Energy was founded in 2018 and now serves 2 million people in Alameda County, California, and the cities of Tracy, Stockton, and Lathrop.
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The Grand Cherokee is due for a refresh, and we just got our first look at it. Jeep claimed “the next chapter in the story of America’s best-selling full-size SUV begins” after releasing the first official images of the updated model. When will we see the Jeep Grand Cherokee as an EV?
2026 Jeep Grand Cherokee first look
Days after revealing the new Compass, Jeep is teasing another refreshed model, its best-selling Grand Cherokee.
Although it was the best-selling full-size SUV in the US last year, the Grand Cherokee is due for an update. The latest model was launched in 2021, but Jeep added a two-row version in 2022.
It remained Jeep’s top seller in the US last year with over 216,000 models sold, but sales were down 12% compared to 2023. It was also one of the best-selling plug-in hybrid (PHEV) vehicles, with over 27,500 4xe models
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Jeep is giving us our first official look at the updated 2026 Grand Cherokee, inside and out. The first image previews the front end, which features new LED headlights and a revamped seven-slot grille, similar to the new Compass.
The interior is restyled with a simplified setup and other minor infotainment and climate control display adjustments. The preview also shows an added passenger screen.
When will Jeep launch the Grand Cherokee EV?
Jeep will continue to assemble the updated SUV in Detroit. The new 2026 Jeep Grand Cherokee will be available as a two-row, three-row L, and a plug-in hybrid 4xe, but when will we see an EV version? The outgoing 4xe model is already one of the top three selling PHEVs in the US, so a fully electric version would make sense.
As part of its 2023 agreement with the UAW, Jeep revealed plans to launch the Grand Cherokee EV in 2027. It was scheduled to be built at the Detroit Assembly Complex, but plans have likely changed since then.
New Jeep Compass EV (Source: Stellantis)
Jeep’s new Compass will be available as an EV, but only in Europe. At least for now. Stellantis halted operations at its Brampton Assembly plant earlier this year, where the Compass is built, as it “reassesses its product strategy in North America.”
For those in the US, Jeep currently offers one EV. The Wagoneer S (pictured on the left above), Jeep’s first global electric SUV, starts at $65,200 and has a range of up to 294 miles.
Later this year, Jeep is expected to launch the Recon EV (pictured on the right above), a rugged electric SUV like a Wrangler.
Jeep is currently offering employee pricing plus an extra $1,500 cash allowance on top of the $7,500 EV tax credit on 2025 Wagoneer S models. If you’re looking to snag some savings, you can use our link to find Jeep Wagoneer S models in your area today.
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Can Kia’s first electric sedan live up to the hype? After launching the EV4 in Korea, we are finally seeing it in action. A new test drive of the EV4 gives us a closer look at what to expect as Kia prepares to take it global. Here’s how it went down.
Kia EV4 test drive: The good, the bad, and the ugly
Kia claims the EV4 will “set a new standard in electric vehicles” with long-range capabilities, fast charging, and a sleek new design.
The electric sedan features a unique, almost sports-car-like profile with a long-tail silhouette and added roof spoiler.
Kia claims it is “the new look of a sedan fit for the era of electrification.” Despite its four-door design, the company is calling it a new type of sedan.
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The design is not only eye-catching, but it’s also super efficient. With a drag coefficient of just 0.23, the EV4 is Kia’s most aerodynamic vehicle so far, enabling maximum driving range and efficiency.
Kia opened EV4 orders in South Korea in March, starting at about $29,000 (41.92 million won). It’s available with two battery options: 58.2 kWh and 81.4 kWh. The entry-level “Standard Air” model, powered by the 58.2 kWh battery, is rated with up to 237 miles of driving range.
Kia EV4 sedan Korea-spec (Source: Hyundai Motor)
The “Long-Range Air” variant starts at 46.29 million won ($31,800) and has a driving range of up to 331 miles (533 km) in Korea.
With charging speeds of up to 350 kW, the EV4 can charge from 10% to 80% in around 29 minutes. The long-range battery will take about 31 minutes.
Kia EV4 sedan interior (Source: Hyundai Motor)
The interior boasts Kia’s latest ccNC infotainment system with a 30″ Ultra-wide Panoramic Display. The setup includes dual 12.3″ driver displays, navigation screens, and a 5″ air conditioning panel.
With deliveries kicking off, we are seeing some of the first test drives come out. A review fromHealerTV gives us a better idea of what it’s like to drive the EV4 in person.
Kia EV4 test drive (Source: HealerTV)
Sitting next to Kia’s first pickup, the Tasman, the reviewer mentions the EV4 feels “particularly newer.” The test drive starts around the city with a ride quality similar to that of the K5, if not even better.
As you can see from the camera shaking, the ride feels “a bit uncomfortable” on rough roads. However, on normal surfaces and speed bumps, Kia’s electric sedan “feels neither too soft nor too hard,” just normal. The reviewer calls the EV4’s overall ride quality “quite ordinary” with “nothing particularly special about it.”
When accelerating, the electric car was smooth in the beginning but felt “a little lacking in later stages.” Overall, it should be enough for everyday use.
One of the biggest issues was that the rear window appeared too low. The rear brake lights also stick out, making it hard to see clearly through the rearview.
Keep in mind that the test drive was the Korean-spec EV4. Kia will launch the EV4 in Europe later this year and in the US in early 2026.
In the US, the EV4 will include a built-in NACS port for charging at Tesla Superchargers and a driving range of up to 330 (EPA-est) miles. Prices will be revealed closer to launch, but the EV4 is expected to start at around $35,000 to $40,000.
Would you buy Kia’s electric sedan for around $35,000? Or would you rather have the Tesla Model 3, which starts at $42,490 in the US and has up to 363 miles of range? Let us know in the comments.
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