The federal government recently revised its rules in 2023 for which electric and plug-in hybrid cars are eligible for the $7,500 tax incentive. Which cars still qualify? Read on to find out.
One of the main reasons to switch to an electric car, besides performance, technology, and reducing your carbon footprint is lower running costs. Electric cars, when charged at home, can save you hundreds of dollars a month in “fueling” costs compared to gasoline vehicles. They do, however, cost more to buy.
There are, however, some government incentives that can help offset the higher purchase price of an EV. For instance, the Federal government in the United States gives you tax credit when you purchase a plug-in hybrid or all-electric car. You can take up to $7,500 off the cost of the vehicle just from this one EV tax credit alone. But your vehicle has to qualify – and in late April 2023, the government clarified its rules regarding which vehicles are eligible for the credit, which focuses on supporting vehicles made in, and using battery components from, the North American region.
Under the new provisions, up to $7,500 is available for new electric vehicles and plug-in hybrids, and there is now a credit of up to $4,000 for used electric vehicles, which can make buying an EV even more affordable for some drivers. However, price caps are in place: passenger cars priced at over $55,000 and vans, trucks, and SUVs priced at over $80,000 are no longer eligible for credits.
Under the new Act, only vehicles whose final assembly is completed in North America qualify for clean energy vehicle credits. This means that many vehicles that previously qualified for clean energy incentives are no longer eligible. Furthermore, for vehicles placed in service April 18, 2023 and after, not only do they have to be assembled in North America, but they must meet new critical mineral and battery component requirements for a credit of:
A vehicle that doesn't meet either requirement will not be eligible for a credit.
What does that mean for someone considering purchasing an EV or a plug-in hybrid? Mostly, the list of vehicles that are eligible for the full tax credit is shorter than before, thanks to the new regulations about production and battery componentry.
As of this writing, only a handful of electric vehicles qualify for the full $7,500 incentive. Tesla leads the way with $7,500 available on all Model Y and Model 3 versions, except for the entry-level rear-wheel drive models, whose batteries contain some offshore components. They get a $3,750 credit. Notably, the larger and more expensive Model S and Model X are no longer eligible for incentives due to their high list prices.
At General Motors, the affordable Bolt EV, Bolt EUV, and upcoming models such as the Silverado EV, Blazer EV, and Trailblazer EV will qualify for the full incentive. Trim levels of the Cadillac Lyriq electric SUV which sell for less than $80,000 will also be eligible for $7,500.
The popular Ford F-150 Lightning pickup truck, made in the USA with locally-sourced battery components, is eligible for the full $7,500 rebate, in trim levels that sneak under the $80,000 price cap. High trim levels such as the Lariat and Platinum won’t be eligible for the rebate. The Mustang Mach-E crossover and E-Transit electric van now only qualify for a $3,750 rebate.
Volkswagen’s ID.4, made in Chattanooga, Tennessee with locally-produced battery cells from SK Innovation in Georgia, is eligible for the full $7,500 rebate, bringing the effective prices of some trim levels below the $40,000 mark – making it the most affordable electric crossover now available. Volkswagen is the only foreign nameplate with a full-electric vehicle eligible for the full rebate.
It's also worth noting that there are a handful of plug-in hybrid models eligible for the $7,500 rebate. They include the Chrysler Pacifica PHEV, Lincoln Aviator Grand Touring PHEV, and Lincoln Corsair Grand Touring PHEV.
While many electric cars and plug-in hybrids no longer qualify for the full $7,500 rebate, thanks to local production and some local componentry in their batteries, there is a long list of vehicles eligible for $3,750 in tax incentives. The best place to look up which vehicles are eligible is on the GreenCars Incentive tool or at https://fueleconomy.gov/feg/tax2023.shtml (opens in a new tab). And don’t forget that there are many regional and local incentives available as well.
Senior Editor and GreenCars Contributor
Laurance Yap worked for a decade as an automotive journalist before joining Porsche, where he ran PR and marketing in Canada. He led global marketing for RM Sotheby’s, and is a senior manager at GreenCars and a regular contributor to the site.
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RecommendationsStarting in January, fewer electric vehicles will be eligible for the federal $7,500 tax incentive. Which vehicles still qualify? Read on to find out.
RecommendationsWhile you probably have heard of the $7,500 federal tax incentive for electric cars, did you know it also applies to plug-in hybrids? Here's a list of plug-in vehicles that could save you thousands at purchase.
OwnershipHow do you claim the full $7,500 EV tax credit? The list of EVs that qualify for the $7,500 EV tax credit is a short one now that the government's latest regulations have been implemented. However, almost all electric cars qualify for the full EV credit if you lease.
