Electric Cars and Plug-In Hybrids That Qualify for Federal Tax Credits
Even if the Trump administration takes away the EV tax credit, these new cars, trucks, and EVs still qualify in the meantime
If you’re thinking about buying an electric car or a plug-in hybrid, you should be aware that the incoming Trump administration has proposed getting rid of a federal EV tax credit of up to $7,500, according to a report from Reuters—a change that could make new and used EVs and PHEVs more expensive for consumers.
"It will likely take some time for policymakers to repeal or limit these incentives, but if you’re looking to buy an EV and save thousands of dollars by using tax credits, it’s better to buy sooner rather than later," says Alexandra Grose, senior policy counsel at Consumer Reports.
The tax credit is still available on eligible vehicles in the meantime. However, that doesn’t mean you should rush into a purchase you’re not ready for. “Only make a purchase if you’ve already done your research and found a safe, reliable EV or PHEV that fits your needs and budget,” says Jake Fisher, senior director of CR’s auto test center. “But don’t buy a car just for the sake of getting the tax credit.”
Which Electric Cars Have a Tax Credit for 2024?
The Treasury Department’s official list of eligible vehicles shows that the following vehicles qualify for a full $7,500 tax credit if placed in service between Jan. 1 and Dec. 31 of 2024:
- Acura ZDX EV (2024 models years, MSRP $80,000 or below)
- Cadillac Lyriq (2024 model year, MSRP $80,000 or below)
- Chevrolet Blazer EV (2024 model year, MSRP $80,000 or below)
- Chevrolet Bolt and Bolt EUV (2022 and 2023 model years, MSRP $55,000 or below)
- Chevrolet Equinox EV (2024 model year, MSRP $80,000 or below)
- Chrysler Pacifica Hybrid PHEV (2022 through 2024 model years, MSRP $80,000 or below)
- Ford F-150 Lightning (2022 through 2024 model years, MSRP $80,000 or below)
- Honda Prologue (2024 model year, MSRP $80,000 or below)
- Tesla Model 3 Performance (2023 and 2024 model years, MSRP $55,000 or below)
- Tesla Model X Long Range (2023 and 2024 model years, MSRP $80,000 or below)
- Tesla Model Y All-Wheel Drive (2023 and 2024 model years, MSRP $80,000 or below); Performance (2023 and 2024 model years, MSRP $80,000 or below); and Rear-Wheel Drive (2024 model year only, MSRP $80,000 or below)
- Volkswagen ID.4 standard, S, Pro S Plus, Pro S, Pro, AWD Pro, AWD Pro S, and AWD Pro S Plus (most 2023 and 2024 model year with SK On battery components, MSRP $80,000 or below)
The following vehicles qualify for a partial $3,750 tax credit if placed in service between Jan. 1 and Dec. 31 of 2024:
- Audi Q5 PHEV (2023 and 2024 model years, MSRP $80,000 or below)
- Ford Escape Plug-In Hybrid (2022 through 2024 model years, MSRP $80,000 or below)
- Jeep Grand Cherokee 4xe (2022 through 2024 model years, MSRP $80,000 or below)
- Jeep Wrangler 4xe (2022 through 2024 model years, MSRP $80,000 or below)
- Lincoln Corsair Grand Touring (2022 through 2024 model years, MSRP $80,000 or below)
- Nissan Leaf (2024 model year, sold on or after March 6, 2024, MSRP $55,000 or below)
- Rivian R1S and R1T (2022 through 2024 model years, MSRP $80,000 or below)
For 2024, the Rear Wheel Drive and Long Range versions of the Tesla Model 3, the Ford Mustang Mach-E and E-Transit van, and the Lincoln Aviator Grand Touring plug-in hybrid (PHEV) will no longer qualify.
Photo: Nissan Photo: Nissan
To qualify for the first $3,750, a portion of a vehicle’s battery components must be produced or assembled in North America. To get the second $3,750, a portion of the 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 percentages were set to go up every year starting in 2024, which is also when vehicles with components from countries that have been designated “foreign entities of concern” are no longer eligible for a tax credit.
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—although tax credits on leases will also likely go away with the Trump administration’s changes.
The Treasury Department initially said that the tax credit’s sourcing and assembly requirements were aimed at moving EV manufacturing and sourcing away from China and to the U.S. We don’t yet know how any of the Trump administration’s changes will affect the automotive industry, including those manufacturers who have made significant investments in U.S.-based EV manufacturing. However, repealing the credit will likely add an affordability barrier for consumers who want to purchase vehicles with lower tailpipe emissions.
“CR has long advocated for these tax credits because they deliver big savings for consumers interested in cleaner cars," says Grose.
How Do You Claim the EV Tax Credit?
As of 2024, eligibility is determined based on the individual vehicle—not by model. Automakers submit the vehicle identification numbers (VINs) of eligible vehicles to the IRS, and only those vehicles qualify for a tax credit.
“Most dealerships will apply the tax credit during the purchasing process," adds Grose. "If they don’t, you can submit IRS Form 8936 when filing your taxes. Once you’ve made the purchase, you’re in good shape, as the government cannot block claimed credits retroactively."
What Is the Income Limit for the EV Tax Credit?
It’s not just the car—it’s also the buyer. To qualify for a new car tax credit, your household income must have an adjusted gross income of up to $300,000. If you’re filing as head of household, you 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.
Photo: Chevrolet Photo: Chevrolet
The Rules
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:
• A vehicle’s MSRP must not exceed certain limits, so pricey EVs like the GMC Hummer EV, Lucid Air, and Tesla Model S 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.
• 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.
• 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.
• 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.
• 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.
• 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. For PHEVs, the tax credit is calculated either as 15 percent of the vehicle’s MSRP, the dollar difference between the cost of the PHEV and a similarly equipped gas-powered version of the same vehicle, or $7,500—whichever is lowest.
• Starting in 2024, vehicles with battery components sourced from countries that have been designated “foreign entities of concern"—including companies owned by, controlled by, or subject to the jurisdiction or direction of the governments of China, Iran, North Korea, and Russia—will no longer be eligible for a tax credit. Automakers will be responsible for tracing their supply chains, and the IRS will determine which vehicles meet the criteria.
• There is no vehicle sales cap on tax credits that made EVs and plug-in hybrids from Tesla, GM, and Toyota ineligible under earlier rules. In years past, once an automaker sold more than 200,000 qualifying vehicles, the credit began to phase out.
Photo: Chevrolet Photo: Chevrolet
Do Leased EVs Qualify for a Full Tax Credit?
Most traditional leases currently 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.
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 would also be able to enjoy the $7,500 credit as long as the dealer passes those savings along.
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.”
Some automakers, including Hyundai, Lucid, and Polestar, already factor in a full $7,500 tax credit to the lease deals listed on their websites. Learn more about leasing here.
Do Used EVs Qualify for a Tax Credit?
Buyers of used EVs currently get a tax credit for the first time—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 an authorized dealership, and only if the vehicle wasn’t previously resold after Aug. 16, 2022. In other words, a one-owner used car sold at a dealership may be eligible for a tax credit, but a two-owner car won’t be. A one-owner car sold privately won’t be eligible, either.
The income threshold is lower for used EV buyers: $150,000 for joint filers, $112,500 for a head of household, and $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.
This tax credit will also likely disappear once the Trump administration makes its changes.
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