As part of a massive tax, climate, and health-care bill signed into law on Tuesday by President Biden, Congress extended federal incentives to help spur sales of electrified cars to reduce dependence on fossil fuels and cut greenhouse gases.
This replaces an original program enacted back in 2010 that established a one-time $7,500 tax credit to help spur sales of full-electric vehicles (EVs) and a variable amount based on battery size for plug-in hybrids (PHEVs). Unfortunately, the credits were not permanent, being phased out once an automaker sold 200,000 electrified rides. They’ve since expired for General Motors and Tesla, and were set to wind down for Toyota beginning this fall.
However, the Inflation Reduction Act, as the legislation is called, only extends the $7,500 credit for electric car and plug-in hybrid buyers selectively. As it stands, affluent consumers and many current full-electric models are now deemed ineligible for the credits.
For starters, the measure restricts the one-time tax credit to electrified trucks, vans, and SUVs priced at less than $80,000, and passenger cars with MSRPs no higher than $55,000. Not only that, eligibility for the tax credit would be limited to families having gross incomes of less than $300,000.
Also, vehicles must be assembled in the U.S. to qualify for the tax credit, which means the incentive no longer applies to current EVs and PHEVs sold by Kia, Hyundai, and Toyota, among others. On the plus side, General Motors (including Chevrolet, Cadillac, and GMC EVs) and Tesla will have their eligibility in the program renewed, at least for qualifying buyers and models that clear the price cap, on January 1.
Note that because some models are assembled in factories both here and abroad, consumers and dealers will have to check a given electrified ride’s vehicle information number (VIN) to confirm its eligibility in the program. On the plus side, in 2024 the incentive will switch from a one-time tax credit that’s claimed in the following tax year, to a rebate that will be applicable at the point of sale that affords an immediate price cut.
Further muddying the proverbial waters down the road, beginning in 2024 EVs will be required to have at least 40 percent of battery materials sourced by a U.S. company or a trading partner company to qualify for the credit, and would have to be 100 percent made in North America by 2029. As it stands, most of the lithium-ion batteries used by current EVs come from China.
Buyers can still take advantage of the previous program, however, if they have written sales contracts in hand before the bill was signed into law. According to the IRS this includes those having already make a non-refundable deposit or down payment of at least five percent of the purchase price.
In the meantime, here are the electric cars and plug-in hybrids for 2022 that remain eligible for the $7,500 federal tax credit through the end of the year, subject to the aforementioned income limitations:
- Audi Q5 PHEV
- BMW 3 Series PHEV
- BMW X5 PHEV
- Ford Mach-E
- Ford Escape PHEV
- Ford F-Series Lightning
- Ford E-Transit Van
- Chrysler Pacifica PHEV
- Jeep Grand Cherokee PHEV
- Jeep Wrangler PHEV
- Lincoln Aviator PHEV
- Lincoln Corsair PHEV
- Lucid Air
- Nissan Leaf
- Rivian R1S
- Rivian R1T
- Volvo S60 PHEV