The recently passed Inflation Reduction Act (IRA) drastically changed the incentives available for electric vehicles (EVs). While there are many great new opportunities for EV incentives, the details are not exactly easy to follow. So, in this article, we’ll break down what you need to know about which EVs qualify for incentives now and in the coming years.
- The IRA updated the federal EV incentives available through the Clean Vehicle Credit while also adding some requirements for eligibility.
- The details about which EVs qualify for incentives may vary over time depending on their cost and other manufacturing details.
- There are also now income-specific EV incentive requirements rolling out in 2023.
- Save even more by powering your EV with clean energy when you go solar through EnergySage!
What’s in this article?
- What makes a vehicle eligible for federal EV incentives?
- EVs that currently qualify for incentives
- Other factors in claiming EV incentives
- How to determine if an EV qualifies for incentives
- How federal EV incentives are set to change over time
- Other EV rebates and incentives to know about
What makes an EV eligible for federal incentives?
The IRA updated the Qualified Plug-in Electric Drive Motor Vehicle Credit, now known as the Clean Vehicle Credit. There are two key new requirements that impact an EV’s eligibility, which go into effect at different points:
- Production location: final assembly of the vehicle must now take place in North America. This requirement took effect immediately when the IRA passed on August 17, 2022. Additional manufacturing requirements come into play later.
- 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 a MSRP above $55,000. This piece of the Clean Vehicle Credit goes into effect on January 1, 2023.
Which EVs currently qualify for incentives?
According to the Alternative Fuels Data Center, the following EVs and plug-in hybrid vehicles (PHEVs) may currently qualify for the Clean Vehicle Credit because they are assembled in North America and the manufacturer has not yet met the manufacturer sales cap (more details about this sales cap below):
- 2022 Audi Q5 PHEV
- 2022 and 2023 BMW 330e (PHEV)
- 2022 BMW X5 PHEV
- 2022 Chrysler Pacifica PHEV
- 2022 Ford Escape PHEV
- 2022 Ford F-150 Lightning (EV)
- 2022 Ford Mustang Mach-E (EV)
- 2022 and 2023 Jeep Grand Cherokee 4xe PHEV
- 2022 and 2023 Jeep Wrangler 4xe PHEV
- 2022 and 2023 Lincoln Aviator PHEV
- 2022 Lincoln Corsair Plug-in (PHEV)
- 2022 Lucid Air (EV)
- 2023 Mercedes EQS SUV (EV)
- 2022 and 2023 Nissan Leaf (EV)
- 2022 Rivian R1S (EV)
- 2022 Rivian R1T (EV)
- 2022 Volvo S60 (EV)
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 some 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.
Which best-selling vehicles might qualify for EV incentives in the future?
The following vehicles don’t currently qualify for incentives in 2022, but may be eligible beginning in 2023. Notably, Chevrolet, Tesla, and GM models that meet the MSRP requirements were not previously eligible because there was a manufacturing cap of 200,000 vehicles produced.
Vehicles anticipated to be eligible for Clean Vehicle Credit in 2023
|Model year, make & model||Details on eligibility|
|2023 Audi Q5 Plug-in hybrid||Beginning in 2023, anything priced over $80,000 will no longer qualify, so if you choose premium options you may hit that threshold|
|2023 BMW 330e||-|
|2023 Chevrolet Bolt EV and EUV||Manufacturer sales cap was met, so not eligible until 2023|
|2023 Cadillac Lyriq||Manufacturer sales cap was met, so not eligible until 2023; anything priced over $80,000 will not qualify, so if you choose premium options you may hit that threshold|
|2023 Jeep Grand Cherokee 4xe PHEV||Beginning in 2023, anything priced over $80,000 will no longer qualify, so if you choose premium options you may hit that threshold|
|2023 Jeep Wrangler 4xe PHEV||-|
|2023 Lincoln Aviator PHEV||Beginning in 2023, anything priced over $80,000 will no longer qualify, so if you choose premium options you may hit that threshold|
|2023 Nissan Leaf||-|
|2023 Tesla Model 3||Beginning in 2023, anything priced over $55,000 will no longer qualify, so if you choose premium options you may hit that threshold|
|2023 Tesla Model Y|
|2023 Volkswagen ID.4||VW started producing these in Chattanooga, Tennessee in October 2022; you’ll need to confirm the one you’re buying was made there|
Some other EVs fall off of the Clean Vehicle Credit eligible list beginning in 2023 if they’re priced above the MSRP cap, such as the Lucid Air and Mercedes EQS SUV. Others, including the Tesla Model S and Tesla Model X, will still not be eligible since their price tags are too high, but other Tesla models (listed above) may qualify in 2023.
Which best-selling vehicles no longer qualify for EV incentives?
Some other popular EVs immediately became ineligible for incentives because of the IRA’s requirement that final assembly take place in North America. These EVs are no longer eligible for the Qualified Plug-in Electric Drive Motor Vehicle Credit:
Best-selling vehicles no longer eligible for EV incentives
|Model year, make & model||Details on eligibility|
|2022 Hyundai Ioniq 5||Manufactured in South Korea|
|2022 Kia EV6||Manufactured in South Korea|
|2022 Kia Niro||Manufactured in South Korea|
|2022 Volkswagen ID.4||The 2021 and 2022 vehicles were manufactured in Germany|
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 that impact EV incentive eligibility
There are some other factors to note when determining eligibility for EV incentives, including the purchase date, your income, past EV incentive claims, and whether the vehicle is new or used.
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:
Before August 17, 2022
Credit amounts: $2,500 – $7,500
Key factors to note: amount of credit is based on vehicle’s battery capacity and weight; manufacturer sales cap exists; you’ll still be eligible if you signed a binding contract before IRA passed
Details: if you purchased an EV before the IRA passed, you were eligible for the credits available 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 the specific amount based on the vehicle’s battery capacity and its 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.
August 17, 2022 to December 31, 2022
Credit amounts: $2,500 – $7,500
Key factors to note: amount of credit is based on vehicle’s battery capacity and weight; manufacturer sales cap still exists; final assembly of 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.
January 1, 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, manufacturing, income, and pricing requirements (some changing over time)
Details: in 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 both the critical mineral and the battery component requirements are eligible for a total tax credit of up to $7,500. We’ll cover more of the specific requirements and how they change over time below.
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 rolls out 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 household income limit: $225,000
- Single income limit: $150,000
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. However, if you take possession of your EV prior to January 1, 2023 or if you signed a written binding contract before August 16, 2022, the pricing cap isn’t applicable for you to receive the Clean Vehicle Credit.
The IRA adds EV incentives for some used vehicles – but, not every used EV will qualify. In order 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 household income limit: $112,500
- Single income limit: $75,000
Can you claim an EV incentive twice?
Yes, but you can’t claim the Clean Vaehicle Credit more than once every three years. So, if you claim it in 2023 and are planning on purchasing another EV, you’ll have to wait until 2026 to claim it again.
How to determine if your EV qualifies for incentives
It’s important to note that the specific manufacturing location may still vary by vehicle model, trim, or its 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 some EV incentives are set to change over time
Like many tax incentives, there are changes to eligibility guidelines that roll out over subsequent years beginning in 2023. We mentioned previously that there will be increasingly stringent requirements related to where an EV’s battery and the vehicle itself is produced. These requirements are intended to help encourage manufacturers to make batteries and EVs in the U.S. 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. or a U.S. free-trade agreement partner, or recycled in North America. The percentages increase over time:
|Year||Minimum percent of critical minerals that must meet the requirement|
|2027 and later||80%|
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:
|Year||Minimum percent of battery components that must meet the requirement|
|2024 and 2025||60%|
|2029 and later||100%|
Can you get the Clean Vehicle Credit at the point of purchase?
Yes, in the form of a transfer to the dealer or seller. However, this component of the Clean Vehicle Credit doesn’t roll out until after December 31, 2023. After that date, you’ll be able to transfer the federal EV incentive to the seller you’re buying your EV from in order to reduce the price you pay upfront.
Other EV rebates and incentives to know about
In addition to the federal EV incentives available through the Clean Vehicle Credit, depending on where you live you may have state or local EV incentives. Check to see what state-specific EV rebates and incentives are available. Also, as part of the IRA you can also claim 30 percent of the costs to install a home EV charger (up to $1,000) if you install it by December 31, 2022. Read more about home EV charger incentives.
Power your EV with solar
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. One of the best long-term solutions to lower your home EV charging costs is to go solar. 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.
Editor’s note: it’s also important to recognize that like many pieces of the IRA, there’s additional guidance expected to roll out on incentives, so you’ll want to keep an eye out for updates. Details on EVs eligible for incentives can also update based on the manufacturer’s production. We’ll make sure to update this article as additional information becomes available.