Which EVs Qualify for New Inflation Reduction Act Tax Credits?
The Inflation Reduction Act is starting to take effect, and with that comes a change to which EVs earn tax credits. As of April 18th, only 10 EVs will qualify for the full $7,500 tax credit based on new criteria for sourcing and assembly. The goal is to move more production into the U.S. to create jobs and boost the economy, but it also means big changes to the electric vehicle market in America.
10 models earning full $7,500 EV tax credits
With the new regulations, just 10 EVs will still qualify for tax credits going forward. Both the Ford F-150 Lightning and Silverado EV qualify as American-made trucks. Meanwhile, just two cars make the list: Tesla Model 3 Performace and the Chevy Bolt and Bolt EUV lineup.
The remainder of the EVs earning tax credits are SUVs, including the Lincoln Aviator Grand Touring and Cadillac Lyriq. Also included are the Chevy Blazer and Equinox electric SUVs, and all variants of the Tesla Model Y. Finally, the Chrysler Pacifica plug-in hybrid is the lone minivan to earn a $7,500 tax rebate.
Several models still earn $3,725
Based on the split criteria for these new EV tax credits, there are several models that still earn half of the total $7,500 on the table. These include the Jeep Wrangler and Grand Cherokee 4xe plug-in hybrid SUVs. The Ford E-Transit and Mustang Mach-E also get the 50% credit, as do the Escape and Lincoln Corsair PHEVs. Finally, the Tesla Model 3 Standard Range gets half credit as well.
Explaining the Inflation Reduction Act EV tax credits
With a focus on bringing more manufacturing jobs to American soil, the Inflation Reduction Act takes aim at imported EVs. To start, qualifying cars will need to meet two criteria to earn the full $7,500 tax credit.
One measuring stick involves the sourcing of battery minerals and materials. To start, qualifying vehicle batteries must be made of 40% or more American-sourced materials. These minerals may also come from countries with which the U.S. has a free trade agreement. By 2027, the requirement increases to 80%, so manufacturers will have to ramp up production to remain eligible.
The second criterion, according to CNET, measures the production and assembly of these battery packs. As of today, at least 50% of the battery components must come from American factories. By 2029, it will require that 100% of the battery components come from U.S. factories.
In the first quarter of 2023, 65% of electric vehicle sales met the criteria for a full tax credit. Of those, 90 percent would remain eligible under the new rules, according to Automotive News.
New tax credit rules can still change
Of course, as administrations change, the rules regarding EV production and tax credits can change as well. What is true today may not be true when the next president takes office, whether that’s in 2025 or 2029. As of today, however, knowing which EVs qualify for tax rebates is more important than ever.
