Only 5 Cars Are Eligible For $7,500 EV Tax Credit

Only 5 Cars Are Eligible For $7,500 EV Tax Credit

Just last year, it was 10 cars. Now, the number has been cut in half.

Back in the distant past (just two months ago), we wrote a story outlining how few electric vehicles qualified for the full $7,500 federal tax credit for electric vehicles and plug-in hybrids. At the time, just 10 vehicles made the list, and several of those (like the Chevrolet Bolt) have already left production, meaning you can’t bank on buying a new one in 2024. We couldn’t believe how few vehicles qualified for the full credit, but guess what? That number has now been cut in half.

There are now only five vehicles that are eligible to receive a $7,500 tax credit, and it seems that the US government can’t even keep up with how quickly the eligibility requirements are changing. For a deeper dive into why the requirements are so strict (blame the Inflation Reduction Act), check out our previous article that explains the rules for battery content place of assembly, and more.

The EPA website lets buyers see which vehicles are eligible for tax credits, but you may not want to trust this information before doing your own research. The website says, “Not every version of the models listed below will necessarily qualify. Please check with the dealer/seller to determine the eligibility of your specific vehicle.”

It still lists the Bolt EV, Bolt EUV, and Tesla Model 3 Performance, even though all three vehicles are currently out of production and unavailable to order. Sure, you might find a leftover sitting at a dealer lot, but including them on the list won’t be particularly helpful as we get further into 2024.

Since we last covered this topic, the following vehicles are no longer eligible to receive a credit, even a partial one:

General Motors has stepped up to give a discount on these models that makes up for losing the credit, but it’s unclear how long this discount will last. GM only lost the credit because of two minor components, so it’s possible that these vehicles could regain their status later this year. The Tesla Model 3 also dropped off the list because the Performance was the only trim that qualified, and the facelifted Highland model is currently only available in base RWD and Long Range AWD trims.

Excluding vehicles that are no longer in production, buyers now have a choice of five vehicles that qualify for the federal government’s full tax credit, which is now applied at the point of sale for 2024. That’s helpful, as it will effectively pull down your monthly payments by $7,500 total over the course of your loan.

The fully electric vehicles are:

The VW is the only vehicle that didn’t appear eligible on last year’s list, but was added because it is built in Tennessee and switched battery suppliers from LG to SK On.

The Chrysler Pacifica Hybrid is the only PHEV on the list to receive the full credit; the rest only qualify for half.

Due to how the IRA is structured, a vehicle can qualify for a partial $3,750 if a portion of its battery is produced or assembled in North America. As with the full credits, the number of vehicles that qualify has dropped from nine to six. Cars that were dropped from this list are:

That leaves only six qualifying for $3,750:

Oddly, though, the IRA has an $80,000 price cap for trucks and SUVs that several Rivian configurations exceed, so it’s unclear why the EPA lists all of them as eligible.

In due time, more vehicles should qualify for the tax credits as automakers get their US assembly plants and battery factories online. However, the IRA gets increasingly more strict with each passing year, and it’s only keeping the credits in place through December 2032. In the short term, very few vehicles are now eligible for the tax credit, but there is a loophole: leasing.

If you lease rather than buy a new EV, you will get the full $7,500 federal tax credit; it doesn’t matter if the EV you lease was built in Germany or even China. Even EVs that exceed the $55,000 price cap for sedans and $80,000 cap for trucks and SUVs, like the Porsche Taycan, can get the credit when leased. The credit is applied to the terms of the lease, effectively pulling the total amount paid by $7,500. If you lease for 36 months, that would drop the payment by $208 per month. The caveat is that it’s unclear if dealerships are legally required to pass these savings onto customers, as they get the credit, not the person leasing the car.

It may not work for everyone, but leasing is the best way to get an EV in 2024, especially as we are in the midst of a switch to the NACS charging standard that will soon make CCS-equipped cars feel obsolete.

Another caveat to the IRA includes pre-owned vehicles, which can receive a tax credit of up to $4,000 (or 30% of the purchase price, whichever is lower). This sounds great for EV or PHEV buyers on a budget, but the requirements are extremely limiting. The used car must be purchased from a dealership, cost less than $25,000, and be at least two model years old. There are also some personal requirements on income that may preclude you from getting this credit.

The $25,000 cap is the toughest hurdle to overcome, as very few fall below this threshold. Anything priced below $13,333 won’t qualify for the full $4,000 and PHEVs must have a battery of at least seven kWh. The Tesla Model 3 has depreciated below $25,000, meaning you might be able to snag one with a discount.