Claiming the federal tax break for electric vehicle purchases has become easier, but there is a catch. The number of electric vehicles that qualify for the full or partial credit has decreased this year. The requirements for eligibility have become stricter, particularly regarding the sourcing and manufacturing of battery materials. However, experts are optimistic that the list of eligible models will increase over time as automakers establish domestic battery and mineral supply chains. Despite this, experts suggest that waiting for the list to grow is unnecessary, as the economics of purchasing an EV are already favorable. Peter Glenn, founder and co-CEO of EV Life, describes an electric vehicle as a “savings account on wheels.”
To determine which EVs are eligible for the tax credit, the government maintains a running list. It’s important to understand the rules behind eligibility. The EV tax credit has undergone a recent rule change that allows participating car dealers to apply the discount at the point of sale, reducing the sticker price for customers. New electric vehicles can qualify for either the full $7,500 credit or a partial $3,750 credit. There is also a tax credit of up to $4,000 for used electric vehicles.
The qualifying rules for the federal tax credit became stricter in 2024, resulting in a smaller list of eligible EVs initially. These rules include income and price limits, as well as requirements relating to where EV batteries are manufactured and where the materials come from. The most current list of qualifying EVs includes models such as the Tesla Model Y, Ford F-150 Lightning, and Chevrolet Bolt EV.
The requirements for the tax credit include caps on MSRP, with limits of $80,000 for certain vehicles and $55,000 for others. Additionally, a percentage of critical minerals in the EV’s battery must be sourced or processed in the US or a country with a free trade agreement with the US. At least 50% of the EV’s battery components must be manufactured or assembled in the US or a country with a free trade agreement with the US. Income limits also apply, with the credit available only to those with adjusted gross income below a certain amount. Finally, any EVs eligible for the federal discount must undergo final assembly in North America.
Not all EVs qualify for the full $7,500 tax credit, with some only eligible for a partial credit of $3,750. This is due to the battery sourcing rules. To claim the EV tax credit in 2024, customers should check with their dealership to ensure they offer the instant tax credit upfront. The dealership should confirm that the specific EV model qualifies for the tax credit and provide an IRS time-of-sale report. Customers should also double-check that their income falls beneath the limits and consider state-level EV rebates that could be stacked on top of the federal credit.
In conclusion, while the number of EVs eligible for the federal tax credit has decreased this year, experts believe the list will grow over time. However, waiting for more vehicles to qualify may not be necessary as the economics of purchasing an EV are already favorable. It’s important to understand the eligibility requirements and check the government’s list to determine which EVs qualify for the tax credit. Additionally, customers should consider state-level EV rebates and consult with their dealership to ensure a smooth process for claiming the credit.