The Number Of EVs Eligible For The Federal Tax Credit Once Again Shrinks As 2024 Begins

As of the beginning of the year, the federal tax incentive program for electric vehicles has once again been modified.

Effective now, the Clean Vehicle Tax Credit — up to $7,500 for new vehicles and up to $4,000 for used vehicles — can now be claimed at the point of sale, just like a manufacturer rebate. Previously, the credit would not be applied until tax season; when it would be used as a deduction on your income tax filing for the year.

While this change does mean buyers can opt to save money instantly on their EV purchase, the number of new vehicles on which the tax credit can be applied has been reduced. Ultimately, the shrinking list is due to price caps, income caps, and increasingly strict battery sourcing and vehicle assembly requirements.

As part of the Inflation Reduction Act (IRA), the US government stipulates that electric or plug-in hybrid models must meet the following criteria to be eligible for any amount of federal incentive:

• Have a battery capacity greater than 7 kilowatt-hours;
• Have a gross vehicle weight rating (GVWR) less than 14,000 pounds;
• Undergo final assembly in North America;
• Meet stricter battery component sourcing requirements for 2024 model year;
• Have an MSRP under $55,000 if the vehicle is a passenger car;
• Have an MSRP under $80,000 if the vehicle is a truck, van, or SUV.

The IRA splits the credit into two $3,750 halves: at least 60 percent of the car’s battery components must be sourced from North America; and at least 50 percent of the critical minerals in the battery pack must be extracted or processed in North America, or a country with which the US has a free trade agreement.

Additionally, a buyer’s income must also be below a certain threshold to qualify. Some customers may not be able to take the tax credit depending on their tax filing status and modified adjusted gross income. For instance, an individual with a MAGI of more than $150,000 is ineligible, or joint tax returns with a MAGI of more than $300,000 are ineligible.

It’s also worth noting that in order for a buyer to claim the credit at point-of-sale, the dealership selling the vehicle must also be willing to cooperate. The dealership must be willing and able to accept the transfer of that tax credit from the consumer to itself, and then apply for reimbursement from the IRS. Not all dealers are currently participating.

As of the January 1st introduction of the new rules, only a handful of 2024 models are eligible. However, as the year progresses, it’s likely the list will grow as automakers get up to speed on the new sourcing and manufacturing requirements. Currently, the list is down to under 20 models from over 40 in 2023:

• 2022-2023 Chevrolet Bolt EV ($7,500 incentive, MSRP cap $55,000)
• 2022-2023 Chevrolet Bolt EUV ($7,500 incentive, MSRP cap $55,000)
• 2022-2024 Chrysler Pacifica PHEV ($7,500 incentive, MSRP cap $80,000)
• 2022-2024 Ford Escape PHEV ($3,750 incentive, MSRP cap $80,000)
• 2022-2024 Ford F-150 Lightning Standard or Extended Range ($7,500 incentive, MSRP cap $80,000)
• 2022-2024 Jeep Grand Cherokee 4xe ($3,750 incentive, MSRP cap $80,000)
• 2022-2024 Jeep Wrangler 4xe ($3,750 incentive, MSRP cap $80,000)
• 2022-2024 Lincoln Corsair Grand Touring ($3,750 incentive, MSRP cap $80,000)
• 2023-2024 Rivian R1S Dual/Quad Motor Large Pack ($3,750 incentive, MSRP cap $80,000)
• 2023-2024 Rivian R1T Dual/Quad Motor Large/Max Pack ($3,750 incentive, MSRP cap $80,000)
• 2023-2024 Tesla Model 3 Performance ($7,500 incentive, MSRP cap $55,000)
• 2023-2024 Tesla Model X Long Range ($7,500 incentive, MSRP cap $80,000)
• 2024 Tesla Model Y RWD ($7,500 incentive, MSRP cap $80,000)
• 2023-2024 Tesla Model Y Long Range/Performance ($7,500 incentive, MSRP cap $80,000)

Most of the mainstream electric crossovers currently on sale are now temporarily or permanently excluded. The incredibly popular Hyundai Ioniq 5 and Kia EV6, for instance, are both built in South Korea, completely knocking them off the list. The Ford Mustang Mach-E, Volkswagen ID.4, Nissan Leaf, and some versions of the Tesla Model 3 are also no longer eligible.

Some manufacturers, such as General Motors, reportedly plan to offer their own $7,500 purchase incentives to buyers shopping “any vehicles that became ineligible due to the new guidelines.”

Keep in mind this list also only covers the federal tax credit. Some states offer additional incentives towards new EV purchases, though eligibility requirements and credit amounts differ by state. Colorado, for instance, offers an extra $7,500 on models under $35,000 and an extra $5,000 on EVs under $80,000.

As previously mentioned, the list of eligible vehicles will likely expand again slightly in the coming months, but for now remains inevitably short as lawmakers look to reduce US reliance on materials and components manufactured or assembled by “foreign entities of concern,” including China.