Starting on April 18, the Internal Revenue Service released new guidance for U.S. buyers shopping for a new electric or plug-in hybrid vehicle. Right now, only six fully electric vehicles qualify for the full $7,500 EV tax credit, with three more from Chevrolet coming for the 2024 model year (we would expect these 2024 models to roll out slowly and be difficult to find for at least the first few months they are on the market). In addition to those six fully electric cars, two plug-in hybrids also qualify for the full $7,500 credit.
To qualify, a vehicle must be assembled in North America and must meet a strict set of guidelines that cover where battery materials were sourced. If any battery materials come from certain countries (importantly including China), the vehicle’s tax credit is automatically cut in half. Further, according to the IRS, the vehicle’s manufacturer suggested retail price (MSRP) can’t exceed $80,000 for vans, sport utility vehicles and pickup trucks or $55,000 for any other type of vehicle (basically meaning sedans).
Electric vehicles that qualify for the full $7,500 EV tax credit:
Plug-in hybrid cars that qualify for the full $7,500 EV tax credit:
A smaller credit is offered on fully electric cars and plug-in hybrids that are assembled in North America but have batteries with materials sourced from unqualified countries (mostly China).
Electric cars that qualify for a $3,750 EV tax credit:
- Ford E-Transit (2022-2023)
- Ford Mustang Mach-E — all models (2022-2023)
- Tesla Model 3 Standard Range Rear Wheel Drive (2022-2023)
Plug-in hybrid cars that qualify for a $3,750 EV tax credit:
- Ford Escape Plug-in Hybrid (2022-2023)
- Jeep Grand Cherokee PHEV 4xe (2022-2023)
- Jeep Wrangler PHEV 4xe (2022-2023)
- Lincoln Corsair Grand Touring (2022-2023)
As of April 18, 2023, that’s the full list of electric cars and plug-in hybrids that qualify for either the full or half EV tax credit. Notable vehicles that qualified from January 1 through April 17 that no longer qualify for any tax credit include the Nissan Leaf, Genesis Electrified GV70, Rivian R1S and R1T, and Volkswagen ID.4. Notably, the Tesla Model 3 Standard Range Rear Wheel Drive also previously qualified for the full EV tax credit, but now only gets a half credit due to battery materials sourced from China. It is the only Tesla Model 3 that uses such a battery; all other Tesla Model 3 models still get the full EV tax credit.
It should be noted that this list is current as of April 18, 2023, but is subject to change at any time. The IRS offers guidance to automakers on the requirements to qualify for a tax credit, and automakers could make changes to their production vehicles that cause them to gain or lose a credit.