If price was the only thing stopping you from buying an electric vehicle this summer, it’s time to look again. With smart planning you can even get the government to…
The post EV Tax Credits: All The 2023, 2024 Cars And Trucks That Get $7,500 appeared first on Investor’s Business Daily.
Federal EV tax credits are just one factor driving a buying boom this summer. Falling prices and a surge in new models of electric vehicles combine to make this big-ticket purchase less of a splurge.
This confluence of financial carrots is why analysts expect record demand for EVs this summer. That will help EVs crack the key level of 10% of all new auto and truck sales in the U.S. later this year.
But do you know how to maximize your EV tax credits?
Summer Boom In EV Sales
Electric car sales in the U.S. are already strong. The U.S. ranks third globally in EV sales, after the China EV market and Europe. The U.S. market climbed 55% in 2022, reaching a sales share of 8%, according to the latest Global EV Outlook from the International Energy Agency.
This summer’s popularity of EVs is forceful enough to shift the entire economy. Changes ahead for the global auto industry have major implications for the energy sector, the IEA says. And the electrification trend could reduce the need for 5 million barrels of oil a day by 2030.
IEA Executive Director Fatih Birol said, “Electric vehicles are one of the driving forces in the new global energy economy that is rapidly emerging, and they are bringing about a historic transformation of the car manufacturing industry worldwide.”
EV prices are falling so fast, they’re no longer just a luxury. Kelley Blue Book said last month that the average U.S. price of an electric vehicle in May was $55,488, down from almost $65,000 a year ago.
Sales are increasing as prices decline, with May up 4% over April. “April’s downward movement of EV average transaction prices reflects EV automakers, particularly Ford (F) and Tesla (TSLA), seeking a balance between pricing and profitability,” said Michelle Krebs, executive analyst at Cox Automotive.
EV Prices, Tax Credits Power The Switch
But lower sticker prices only tell part of the story. U.S. car buyers enjoy other solid incentives to switch to an electric vehicle. They include a federal income tax credit of up to $7,500 for some new EVs. And don’t forget added rebates and other perks from state and local utilities.
While this nest of incentives sounds complicated — and it is — it’s also worth thousands of dollars in savings. It’s worthwhile to check out eligibility and available perks when shopping for an EV.
Promoting clean energy use was just one facet of 2022’s Inflation Reduction Act. The IRA extended federal EV tax credits for another decade and included eligibility for used EVs. But it also added complex restrictions such as a price cap, income limitations and final assembly rules.
If you took delivery of a new clean vehicle on or after April 18, 2023, it must meet critical mineral and battery component requirements to qualify for the credit.
If drivers have been reluctant to buy an EV because of high prices, another break is coming. Starting in 2024, taxpayers can transfer the EV tax credit to the dealer at the time of purchase. That will lower the price of the vehicle by the qualifying credit amount.
Who Qualifies For The EV Tax Credit
You may qualify for an EV tax credit of up to $7,500, according to the IRS, if you buy a new, qualified plug-in EV or fuel cell electric vehicle. The credit is available to individuals and their businesses. To qualify, you must buy it for your own use, not for resale, and use it primarily in the U.S. Also, your modified adjusted gross income (AGI) may not exceed $300,000 for married couples filing jointly or $225,000 for heads of households. The AGI limit is $150,000 for all other filers.
You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. As long as your modified AGI is below the threshold in one of the two years, you can claim the credit. The credit is nonrefundable, so you can’t get back more on the credit than you owe in taxes. And you can’t apply any excess credit to future tax years.
Vehicles placed in service April 18, 2023, and after must meet all of the criteria listed above. And they must also meet new requirements for critical mineral and battery components for the buyer to get an EV tax credit of up to:
- $3,750 if the vehicle meets the critical minerals requirement only.
- $3,750 if the vehicle meets the battery components requirement only.
- $7,500 if the vehicle meets both.
Which New Electric Vehicles Qualify For EV Tax Credits
But that’s not all. To qualify, a new vehicle must:
- Have a battery capacity of at least 7 kilowatt-hours.
- Have a gross vehicle weight rating of less than 14,000 pounds.
- Be made by a qualified manufacturer.
- Undergo final assembly in North America.
- Meet critical mineral and battery component requirements (as of April 18, 2023).
The sale qualifies for the tax credit only if:
- The seller reports required information to you at the time of sale.
- The seller reports your name and taxpayer identification number to the IRS.
In addition, the vehicle’s manufacturer suggested retail price (MSRP) can’t exceed:
- $80,000 for vans, sport utility vehicles and pickup trucks.
- $55,000 for other vehicles.
MSRP is the retail price of the automobile suggested by the manufacturer, including manufacturer-installed options, accessories and trim but excluding destination fees. It isn’t necessarily the price you pay.
You can find your vehicle’s weight, battery capacity, final assembly location (listed as “final assembly point”) and VIN on the vehicle’s window sticker.
Used EVs Can Qualify, Too
While these rules apply to EV credits for new electric vehicles, Congress threw in another carrot. If you buy a qualified used EV or fuel cell vehicle from a licensed dealer for $25,000 or less, you may be eligible for a used EV tax credit. The credit equals 30% of the sale price up to a maximum credit of $4,000. The credit is nonrefundable, so you can’t get back more on the credit than you owe in taxes. You can’t apply any excess credit to future tax years.
The EV Lease Loophole
Last year’s IRA placed some new and significant limits on which vehicles qualify for the EV tax credits. The EV has to be built in the U.S., Canada, or Mexico; the battery cells must use minerals from a specific list of countries; and the cells and packs have to be made in the U.S. But buyers can get federal tax credits for models not on the list allowed by the Inflation Reduction Act if they lease them.
In the IRA, Congress exempted commercial vehicles from the restrictions. While “commercial” is a term usually applied to vehicles like heavy-duty trucks, the Treasury Department defines leased EVs as “commercial” vehicles. Any leased vehicle may qualify for the tax credit because the North American battery-content and manufacturing rules do not apply to commercial vehicles.
When a dealer buys a vehicle and then leases it to a driver, the Treasury says that’s a commercial transaction because the driver doesn’t take title. This means the dealer or the finance company holding the lease receives the tax credit. Industry representatives and carmakers say the EV tax credit will help lower the price of leases and increase incentive programs. According to Edmunds, leases reached 34% of total EV sales in March, up from just 18% in March 2022.
“A number of lenders … have offered lease incentive programs. Every one I have seen has offered it at the full amount,” Andy Koblenz, executive vice president for legal and regulatory affairs at the National Automobile Dealers Association, said at a Federal Reserve Bank of Chicago webinar on EV tax credits. “We’re starting to see it in the marketplace already.” Incentive programs may increase as leasing “will be an attractive way to help get the EVs into the market.”
State EV Tax Credits And Electric Vehicle Rebates
Some states offer credits or rebates on EV purchases or leases, while utility companies may offer breaks on home charger installations.
Colorado, for example, offers EV tax credits ranging from $2,000 to $8,000 on EV purchases. California’s Clean Vehicle Rebate Project provides rebates from $1,000 to $7,500 for the purchase or lease of new, eligible zero-emission vehicles.
Oregon’s Clean Vehicle Rebate Program is not a tax credit but rather a cash rebate of up to $7,500 on any qualifying purchase or lease. Oregon’s generous rebate program is so popular — it’s handed out $70 million in the past five years — that it is almost out of money and was paused this year. Lawmakers and nonprofits in the state are working to replenish the program’s funding. The Department of Energy’s Alternative Fuels Data Center provides updated state-by-state information on rebates and incentives.
Get Your Federal EV Tax Credit
If your head is spinning from all the rules but you want to maximize your EV tax credit, Investor’s Business Daily did the work for you. The table below includes all 24 vehicles that qualify for the full $7,500 credit when placed into service on or after April 18, 2023.
It also shows an additional 10 vehicles that qualify for a credit of $3,750. See all the details for various levels of EV tax credits at fueleconomy.gov.
Cars And Trucks That Qualify For The EV Tax Credit
| Make | Model | Year | Vehicle Type | Credit Amount | MSRP Limit | Assembled in N. America |
|---|---|---|---|---|---|---|
| BMW | ||||||
| X5 xDrive50e | 2024 | PHEV | $3,750 | $80,000 | Yes | |
| Cadillac | ||||||
| LYRIQ | 2023-2024 | EV | $7,500 | $80,000 | Yes | |
| Chevrolet | ||||||
| Blazer | 2024 | EV | $7,500 | $80,000 | Yes | |
| Bolt | 2022-2023 | EV | $7,500 | $55,000 | Yes | |
| Bolt EUV | 2022-2023 | EV | $7,500 | $55,000 | Yes | |
| Equinox | 2024 | EV | $7,500 | $80,000 | Yes | |
| Silverado | 2024 | EV | $7,500 | $80,000 | Yes | |
| Chrysler | ||||||
| Pacifica PHEV | 2022-2023 | PHEV | $7,500 | $80,000 | Yes | |
| Ford | ||||||
| E-Transit | 2022-2023 | EV | $3,750 | $80,000 | Yes | |
| Escape Plug-in Hybrid | 2022-2023 | PHEV | $3,750 | $80,000 | Yes | |
| F-150 Lightning (Extended Range Battery) | 2022-2023 | EV | $7,500 | $80,000 | Yes | |
| F-150 Lightning (Standard Range Battery) | 2022-2023 | EV | $7,500 | $80,000 | Yes | |
| Mustang Mach-E (Extended Range Battery) | 2022-2023 | EV | $3,750 | $80,000 | Yes | |
| Mustang Mach-E (Standard Range Battery) | 2022-2023 | EV | $3,750 | $80,000 | Yes | |
| Jeep | ||||||
| Grand Cherokee PHEV 4xe | 2022-2023 | PHEV | $3,750 | $80,000 | Yes | |
| Wrangler PHEV 4xe | 2022-2023 | PHEV | $3,750 | $80,000 | Yes | |
| Lincoln | ||||||
| Aviator Grand Touring | 2022-2023 | PHEV | $7,500 | $80,000 | Yes | |
| Corsair Grand Touring | 2022-2023 | PHEV | $3,750 | $80,000 | Yes | |
| Rivian | ||||||
| R1S | 2023 | EV | $3,750 | $80,000 | Yes | |
| R1T | 2023 | EV | $3,750 | $80,000 | Yes | |
| Tesla | ||||||
| Model 3 Long Range All-Wheel Drive | 2023 | EV | $7,500 | $55,000 | Yes | |
| Model 3 Performance | 2022-2023 | EV | $7,500 | $55,000 | Yes | |
| Model 3 Standard Range Rear-Wheel Drive | 2022-2023 | EV | $7,500 | $55,000 | Yes | |
| Model Y All-Wheel Drive | 2022-2023 | EV | $7,500 | $80,000 | Yes | |
| Model Y Long Range All-Wheel Drive | 2022-2023 | EV | $7,500 | $80,000 | Yes | |
| Model Y Performance | 2022-2023 | EV | $7,500 | $80,000 | Yes | |
| Volkswagen | ||||||
| ID.4 AWD PRO | 2023 | EV | $7,500 | $80,000 | Yes | |
| ID.4 AWD PRO S | 2023 | EV | $7,500 | $80,000 | Yes | |
| ID.4 AWD PRO S PLUS | 2023 | EV | $7,500 | $80,000 | Yes | |
| ID.4 PRO | 2023 | EV | $7,500 | $80,000 | Yes | |
| ID.4 PRO S | 2023 | EV | $7,500 | $80,000 | Yes | |
| ID.4 PRO S PLUS | 2023 | EV | $7,500 | $80,000 | Yes | |
| ID.4 S | 2023 | EV | $7,500 | $80,000 | Yes | |
| ID.4 STANDARD | 2023 | EV | $7,500 | $80,000 | Yes |
