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<p class="has-black-color has-text-color has-large-font-size">The rules have been updated. Here’s how to find out which new and used EVs may qualify for a tax credit of up to $7,500.</p>
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<p class="has-black-color has-text-color has-large-font-size">The Treasury Department has released updated rules for electric car buyers—this time related to where EV battery components and minerals come from—that once again change which new electric cars may be eligible for a federal tax credit of up to $7,500. The Tesla Model 3 Performance is now the only Consumer Reports-recommended vehicle that is eligible for a full credit</p>
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<p class="has-black-color has-text-color has-large-font-size">As of April 18, 2023, six vehicles will no longer be eligible for any credit, including the affordable Nissan Leaf (shown below), although it may be added back at a later date. Nine vehicles, including the Ford Mustang Mach-E and the least expensive version of the Tesla Model 3, will get only a partial credit of $3,750. The Chevrolet Bolt, Ford F-150 Lightning, and Tesla Model Y are among the 11 EVs eligible for a full $7,500 credit—and a base-model Bolt should cost just $19,995 after the tax credit and destination fee.</p>
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<p class="has-black-color has-text-color has-large-font-size">The changes are part of the Inflation Reduction Act of 2022. Designed to address climate change, healthcare, and taxes, the legislation also modifies how tax credits for certain new EV purchases are calculated. The provisions of the act went into effect in phases. Vehicles must be manufactured in North America and have an MSRP below $80,000 for an SUV or $55,000 for a sedan, wagon, or hatchback.</p>
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<p class="has-black-color has-text-color has-large-font-size">Beginning April 18, the full tax credit will be divided into two parts. To qualify for the first $3,750, at least 50 percent of a vehicle’s battery components must be produced or assembled in North America. To get the second $3,750, at least 40 percent of critical minerals used in the battery must be extracted or processed in the U.S. or in a country that is a U.S. free-trade agreement partner, or they must have been made from materials recycled in North America. These requirements will get stricter every year.</p>
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<p class="has-black-color has-text-color has-large-font-size">Chris Harto, CR’s senior policy analyst for transportation and energy, says it’s no surprise that fewer cars qualify for a credit. “The requirements were going to be difficult for automakers to meet immediately,” he says, “but we expect this list to grow quite a bit in the coming months and years as automakers now have clear targets to hit to become eligible, and are working hard to qualify.”</p>
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<p class="has-black-color has-text-color has-large-font-size">None of these regulations apply to leased EVs and PHEVs, so potential buyers interested in an electric car or plug-in hybrid that isn’t eligible for a tax credit may want to consider leasing instead of purchasing.&nbsp;</p>
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<p class="has-black-color has-text-color has-large-font-size">In this article, Consumer Reports has details on how to maximize your savings, including using tools such as our Electric Vehicle Savings Finder to see which cars qualify. We’ve tested versions of many of the models; click through the model names below for road tests and ratings. Others on the list are either EVs that aren’t on sale yet or plug-in hybrid versions that we haven’t purchased for evaluation but have experienced in most cases. </p>
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<p class="has-black-color has-text-color has-large-font-size">Ultimately, the tax credit may determine just how much money you’ll save by going electric. We will continue to update this article as more vehicles are added to the list.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">Which New-Car Purchases Might Qualify for a Full EV Tax Credit?</h2>
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<p class="has-black-color has-text-color has-large-font-size">The IRS says the manufacturers of the following EVs and PHEVs indicated that they’re currently eligible for a full tax credit of $7,500 provided other requirements are met, such as vehicle MSRP and buyer income, which are explained in detail later in this article:</p>
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<ul class="has-black-color has-text-color has-large-font-size"><li>Cadillac Lyriq (2023 and 2024 model years, MSRP $80,000 or below) </li><li>Chevrolet Bolt (2022 and 2023 model years, MSRP $55,000 or below)</li><li>Chevrolet Bolt EUV (2022 and 2023 model years, MSRP $55,000 or below)</li><li>Chevrolet Blazer (2024 model year, MSRP $80,000 or below) </li><li>Chevrolet Equinox (2024 model year, MSRP $80,000 or below)</li><li>Chevrolet Silverado EV (2024 model year, MSRP $80,000 or below) </li><li>Chrysler Pacifica PHEV (2022 and 2023 model years, MSRP $80,000 or below) </li><li>Ford F-150 Lightning (2022 and 2023 model years, MSRP $80,000 or below)</li><li>Lincoln Aviator Grand Touring PHEV (MSRP $80,000 or below)</li><li>Tesla Model 3 Performance only (2022 and 2023 model years, MSRP $55,000 or below)</li><li>Tesla Model Y All-Wheel Drive, Long Range, and Performance (2022 and 2023 model years for All-Wheel Drive and Long Range, 2022 model year only for Performance, MSRP $80,000 or below)</li><li>Volkswagen ID.4 (2023 model year, MSRP $80,000 or below)</li></ul>
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<p class="has-black-color has-text-color has-large-font-size">If a manufacturer uses different suppliers or assembly locations, some vehicles may qualify while others may not—even if they’re the same exact make and model. That’s the case for the Tesla Model 3, which qualifies for either a full or partial tax credit depending on how it’s equipped. Other vehicles may qualify in the future after automakers make changes to their battery and component suppliers, or if the U.S. signs free-trade agreements with more countries.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">Which Cars May Qualify Only for a Partial EV Tax Credit?</h2>
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<p class="has-black-color has-text-color has-large-font-size">The Treasury Department says the manufacturers of the following EVs and PHEVs indicated that they’re currently eligible for a partial tax credit of $3,750 if put into service on or after April 18, 2023, provided other requirements are met, such as vehicle MSRP and buyer income:</p>
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<ul class="has-black-color has-text-color has-large-font-size"><li>Ford Escape PHEV (2022 and 2023 model years, MSRP $80,000 or below; may qualify for a partial tax credit of $6,843 due to battery size if put into service before April 18, 2023)</li><li>Ford E-Transit (2022 and 2023 model years, MSRP $80,000 or below)</li><li>Ford Mustang Mach-E (2022 and 2023 model years, 2022 and 2023 model years, MSRP $80,000 or below)</li><li>Jeep Wrangler 4xe PHEV (2022 and 2023 model years, MSRP $80,000 or below)</li><li>Jeep Grand Cherokee 4xe PHEV (2022 and 2023 model years, MSRP $80,000 or below)</li><li>Lincoln Corsair Grand Touring PHEV (2022 and 2023 model years, MSRP $80,000 or below; may qualify for a partial tax credit of $6,843 due to battery size if put into service before April 18, 2023)</li><li>Rivian R1S (2023 model years, MSRP $80,000 or below)</li><li>Rivian R1T (2023 model years, MSRP $80,000 or below)</li><li>Tesla Model 3 standard range Rear-Wheel Drive only (2022 and 2023 model years, MSRP $55,000 or below)</li></ul>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">Which Cars No Longer Qualify for the EV Tax Credit?</h2>
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<p class="has-black-color has-text-color has-large-font-size">These vehicles no longer appear on the Treasury Department’s list of vehicles that qualify for the tax credit, although they appeared on prior lists. If these vehicles were put into service before April 18, 2023, owners may still qualify for a tax credit:</p>
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<ul class="has-black-color has-text-color has-large-font-size"><li>Audi Q5 TFSI e Quattro PHEV</li><li>BMW 330e sedan (may have qualified for partial credit up to $5,836 due to battery size if made in North America)</li><li>BMW X5 xDrive45e SUV</li><li>Genesis GV70 Electrified SUV</li><li>Nissan Leaf</li><li>Volvo S60 PHEV (may have qualified for partial credit of $5,419 due to battery size), Extended Range, and T8 Recharge</li></ul>
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<p class="has-black-color has-text-color has-large-font-size">Although the Volkswagen ID.4 wasn’t on the initial list, it now qualifies for a full tax credit. Nissan says it has not yet been able to certify that the Leaf meets new battery component and critical mineral requirements in time for the April 18 deadline. "We are working closely with our suppliers and are hopeful that Leaf will qualify for at least partial credit in the future," a spokesperson for the automaker told CR.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">The Rules</h2>
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<p class="has-black-color has-text-color has-large-font-size">In order to qualify for a tax credit of up to $7,500, a new EV or eligible plug-in hybrid vehicle (PHEV) must meet certain rules:&nbsp;</p>
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<p class="has-black-color has-text-color has-large-font-size">• A vehicle’s MSRP must not exceed certain limits, so pricey EVs, such as the GMC Hummer EV, Lucid Air, and Tesla Model S and Model X, won’t qualify. For SUVs, pickup trucks, and vans, the threshold is $80,000. For sedans, hatchbacks, wagons, and other vehicles, the credit cuts off at $55,000. These limits are based on a vehicle’s MSRP, not on its sale price, so a heavily discounted luxury car would not qualify. In addition, this requirement may not apply to some leased vehicles.</p>
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<p class="has-black-color has-text-color has-large-font-size">• Regardless of how a vehicle is advertised, whether it counts as an SUV, wagon, or hatchback is determined by the Environmental Protection Agency and listed on the window sticker. For example, the Ford Mustang Mach-E is listed as a small SUV, but the Chevrolet Bolt EUV is classified as a small station wagon.</p>
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<p class="has-black-color has-text-color has-large-font-size">• A vehicle must be assembled in North America, including Canada and Mexico, to qualify for any tax credit. This eliminates credits for vehicles assembled elsewhere, including the BMW i4, Hyundai Ioniq 5, Kia EV6, and Toyota bZ4X. (This requirement also may not apply to some leased vehicles.) It doesn’t matter if a vehicle comes from an Asian or European brand, only where it’s assembled.</p>
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<p class="has-black-color has-text-color has-large-font-size">•&nbsp;To qualify for a full tax credit, at least 50 percent of a vehicle’s battery components must be produced or assembled in North America. In addition, at least 40 percent of critical minerals used in the battery must be extracted or processed in the U.S. or in a country that’s a U.S. free-trade agreement partner, or they must have been made from materials recycled in North America. The new rules will become stricter over time, with requirements increasing by 10 percent each year through 2027. By then, 90 percent of battery components and 80 percent of critical minerals will have to meet the guidelines.</p>
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<p class="has-black-color has-text-color has-large-font-size">• Car buyers must meet certain income guidelines. Households with an adjusted gross income up to $300,000 will still qualify for the new-car credit, while heads of household must earn below $225,000 and individual filers will qualify only with income below $150,000. This provision may not apply if a vehicle is leased.</p>
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<p class="has-black-color has-text-color has-large-font-size">•&nbsp;PHEVs with a battery of at least 7 kWh may qualify for a tax credit as long as they meet all of the other requirements.</p>
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<p class="has-black-color has-text-color has-large-font-size">• Starting on Dec. 31, 2023, vehicles with components from countries that have been designated “foreign entities of concern” will no longer be eligible for a tax credit. The list of countries with this designation has not yet been compiled.</p>
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<p class="has-black-color has-text-color has-large-font-size">• There’s no longer a 200,000 vehicle sales cap on tax credits that made EVs and plug-in hybrids from Tesla, GM, and Toyota ineligible under prior rules. Previously, once an automaker sold more than 200,000 qualifying vehicles, the credit began to phase out.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">Why Does the EV Tax Credit Keep Changing?</h2>
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<p class="has-black-color has-text-color has-large-font-size">The Treasury Department says that the new rules are aimed at moving EV manufacturing and sourcing away from China and to the U.S. and its free-trade partners, which include Australia, Bahrain, Canada, Chile, Colombia, Costa Rica, Dominican Republic, El Salvador, Guatemala, Honduras, Israel, Jordan, South Korea, Mexico, Morocco, Nicaragua, Oman, Panama, Peru, and Singapore. They also now include Japan, after it entered into a special minerals-focused trade agreement with the U.S., signed just before the new rules were released, and may expand to include countries in the European Union as well, Reuters reports. A 2022 analysis of the EV supply chain from the International Energy Agency shows that a vast majority of minerals, components, and battery cells are currently from China. </p>
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<p class="has-black-color has-text-color has-large-font-size">Although directives about battery and mineral sourcing are meant to incentivize manufacturing in the U.S., automakers and EV advocates have told Consumer Reports they’re concerned that the complexity of these rules may make it difficult for consumers to find a vehicle that qualifies for the credits or understand how much they’ll be eligible to claim.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">How Do You Know If the Car You Want Qualifies for the EV Tax Credit?</h2>
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<p class="has-black-color has-text-color has-large-font-size">Buyers who are interested in the tax credit must do some research to see if the specific vehicle they’re considering qualifies. The IRS has a list of vehicle makes and models that automakers have certified as potentially qualifying for a credit, under penalty of perjury. There’s also a list at fueleconomy.gov.</p>
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<p class="has-black-color has-text-color has-large-font-size">CR’s EV Incentive Finder can also tell you whether the model you’re interested in may be eligible for a federal tax credit, as well as state and local incentives that might save you thousands more. GM launched a website where people interested in buying a new EV from GM can see how much of a tax credit—if any—it’s eligible for. And the White House says that Google plans to create a search tool for EV tax credit eligibility as well.</p>
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<p class="has-black-color has-text-color has-large-font-size">Things may get easier in 2024. That’s when qualified dealerships will be able to offer the tax credit directly to buyers at the point of sale, so buyers won’t have to wait to claim the credit on their taxes. Until that provision goes into effect, buyers who don’t have a tax liability may be able to benefit from the tax credit on a lease.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">What If You Have a Car on Order?</h2>
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<p class="has-black-color has-text-color has-large-font-size">Cars that were ordered and paid for earlier this year or in 2022 but haven’t been delivered by April 18, 2023, will be subject to the new regulations on battery and critical mineral content. A White House spokesperson told CR that a car buyer would have to take possession of their vehicle before April 18, 2023, to qualify for the tax credits under the old rules.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">Do Leased EVs Qualify for a Full Tax Credit?</h2>
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<p class="has-black-color has-text-color has-large-font-size">There’s some good news if the car you want to purchase doesn’t qualify for a tax credit: A Treasury spokesperson told CR that most traditional leases would qualify for a $7,500 commercial credit that’s not subject to the myriad requirements that must be met to qualify for the consumer new-vehicle credit.&nbsp;</p>
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<p class="has-black-color has-text-color has-large-font-size">Here’s how it works: In the case of a lease, the dealer would receive the commercial credit, not the person leasing the vehicle, and it would be up to the dealer to pass those savings on to the consumer, potentially by lowering the vehicle’s purchase price. If a dealer does pass the savings along, drivers could get a tax credit on a car made outside North America, such as the popular Hyundai Ioniq 5. High-income consumers and those who lease a high-cost EV, such as a Lucid Air or Tesla Model S or X, would also be able to enjoy the $7,500 credit as long as the dealer passes those savings along. </p>
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<p class="has-black-color has-text-color has-large-font-size">If a buyer chooses to do this, however, they should make sure to double-check the dealership’s math. “Make sure to ask for an itemized bill of sale that shows where the tax credit has been applied,” says Gabe Shenhar, associate director of CR’s Auto Test Center. “And make sure the dealership doesn’t mark up the price of the car accordingly.”&nbsp;</p>
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<p class="has-black-color has-text-color has-large-font-size">Some automakers, including Hyundai, Lucid and Polestar, already factor a full $7,500 tax credit into the lease deals listed on their websites.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">What About Used Cars?</h2>
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<p class="has-black-color has-text-color has-large-font-size">For the first time, buyers of used EVs will get a tax credit, either $4,000 or 30 percent of the sale price of the vehicle—whichever is lower. But that’s only if they buy a car from a dealership, and only if the vehicle wasn’t previously resold after Aug. 16, 2022. In other words, a one-owner used car sold at an authorized dealership may be eligible for a tax credit, but a two-owner car won’t be. Neither will a one-owner car sold privately.</p>
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<p class="has-black-color has-text-color has-large-font-size">The income threshold is lower for used EV buyers: $150,000 for joint filers, $112,500 for a head of household, or $75,000 for an individual. But the rules about where the car was made or where the battery comes from don’t apply to used vehicles.</p>
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<h2 class="has-black-color has-text-color has-extra-large-font-size">Which Cars May Qualify Only for the New EV Tax Credit If Leased?</h2>
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<p class="has-black-color has-text-color has-large-font-size">In addition to the nine vehicles listed above that will lose out on a tax credit starting April 18, 2023, because of battery and critical mineral requirements, these current and coming EVs (and two fuel-cell vehicles) aren’t made in North America and therefore probably won’t qualify for a tax credit if they are purchased, although that might change in the future if their assembly location changes. In addition, dealers may pass a tax credit on to consumers if the vehicle is leased instead of purchased.</p>
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<ul class="has-black-color has-text-color has-large-font-size"><li>Audi E-Tron</li><li>Fisker Ocean</li><li>Genesis GV60</li><li>Hyundai Ioniq 5</li><li>Hyundai Ioniq 6</li><li>Hyundai Kona Electric</li><li>Hyundai Nexo</li><li>Jaguar I-Pace</li><li>Kia EV6</li><li>Kia Niro Electric</li><li>Lexus RZ</li><li>Mazda MX-30</li><li>Mercedes-Benz EQB</li><li>Nissan Ariya </li><li>Polestar 2</li><li>Subaru Solterra</li><li>Toyota bZ4x</li><li>Toyota Mirai</li><li>Volvo C40</li></ul>
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<p class="has-black-color has-text-color has-large-font-size">Regardless of where they’re assembled, these vehicles have an MSRP that is too high and will not qualify for any tax credit if they’re purchased, although dealers may pass a tax credit on to consumers if the vehicle is leased:</p>
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<ul class="has-black-color has-text-color has-large-font-size"><li>Audi E-Tron GT</li><li>BMW i4</li><li>BMW i7</li><li>BMW iX</li><li>Chevrolet Silverado EV (certain options and trim levels above $80,000)</li><li>Ford F-150 Lightning (certain options and trim levels above $80,000)</li><li>Genesis G80 Electric</li><li>GMC Hummer EV</li><li>Lucid Air</li><li>Mercedes-Benz EQE and EQE SUV=</li><li>Mercedes-Benz EQS and EQS SUV</li><li>Porsche Taycan</li><li>Rivian R1T (certain options and trim levels above $80,000)</li><li>Tesla Cybertruck (certain options and trim levels)</li><li>Tesla Model S</li><li>Tesla Model X</li></ul>
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<p></p>
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<p>To read the full article, <a href="https://www.consumerreports.org/cars/hybrids-evs/electric-cars-plug-in-hybrids-that-qualify-for-tax-credits-a7820795671/">click here.</a></p>
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