Cars That Qualify For EV Tax Credit

The federal government offers a tax rebate of up to $7,500 to buyers of certain electric vehicles (EVs) and plug-in hybrids (PHEVs). The rules governing these credits are changing quickly as a result of the new laws and an evolving set of regulations that carry out the law.

The Internal Revenue Service, however, has brought some clarity to the process by releasing a list of new cars that may qualify for the tax credit.

The federal tax credit is available only to individuals who earn $150,000 or less, $225,000 for those who file as head of household, and $300,000 for joint filers. So do price caps: Cars with a manufacturer’s suggested retail price between $60,000 and $75,000 qualify for the maximum tax credit of $7,500 whereas those with a retail price above $75,000 can be eligible for the maximum credit of $3,750.

The new incentives restrict qualifying vehicles to those with low emissions. The incentives are available for trucks and SUVs with manufacturer’s suggested retail prices (MSRPs) of up to $80,000 and cars of up to $55,000.

Examples include the Ford F-150 Lightning Pro ($55,974 MSRP), which qualifies for the rebate; and the Ford F-150 Lightning Platinum ($96,874 MSRP), which does not qualify. A mid-level Lightning Lariat ($74,474 MSRP) may qualify if you do not select options that raise its price above $80,000.

The law requires that vehicles be assembled in the U.S. or Canada to qualify for the rebate, which rules out some popular cars. For example, Hyundai and Kia currently build their electric cars only in Asia. The companies have joined a list of automakers moving some production to the U.S. to ensure their customers can qualify for the rebate.

Technocratic Rules Produce Odd Results

The list, for the most part, looks like analysts expected it to look. But applying a law requires agencies to define its terms, and sometimes those definitions don’t match industries’ expectations.

Tesla markets its tall, bubble-shaped Model Y as an SUV. The company sells it as a 5-seater with two rows of seats or a 7-seater with three. The government agrees that it’s an SUV—if a buyer orders the third row of seats. A 2-row model is a sedan, according to the IRS; since the Model Y has a starting price of $65,990, 7-seat models qualify under the $80,000 SUV price cap. But 5-seat models do not fit under the $55,000 sedan price limit.

Manufacturers Haven’t Given Needed Info To The IRS

As of press time, Hyundai, Jaguar, Kia, Mazda, Mercedes-Benz, Mitsubishi, Subaru, and Toyota were not on the list of qualifying manufacturers. In a statement issued by the National Highway Traffic Safety Administration (NHTSA), the agency said that these companies had entered into agreements with it to become “qualified manufacturers” but had not yet submitted lists of specific makes and models that were eligible for exemption from federal safety standards.

The note indicates that additional information will be available soon and asks users to check back for updates. However, it may be frustrating for buyers because the window is closing on vehicles eligible for the rebate.

New Rules In March

Last year, the government passed a new law that made the rules for claiming tax credits on research and development expenses a moving target. Starting this year, manufacturers will be required to obtain a percentage of critical minerals used in batteries from the U.S. or its trade partners; that requirement will phase in over time—starting at 40 percent this year and increasing to 100 percent by 2029.

The Treasury Department has delayed the enforcement of new efficiency standards set to take effect on January 1, as it works on writing the guidelines that tell manufacturers what the law means. The department now expects to start enforcing the rules in March. When that happens, the list of eligible vehicles will likely shrink.

Qualified Cars for EV Tax Credit

The cars that qualify for the EV tax credit are as follows: