The list of electric cars qualifying buyers for a $7,500 federal tax break has been cut to just 15 to start the new year. The list changes during the year, often shrinking dramatically at the start of a new year and lengthening as the year goes on.
Why the List Changes
Many Americans can qualify for up to $7,500 off the price of a new electric vehicle (EV) thanks to the 2022 Inflation Reduction Act.
The portion of the act concerning electric cars had two purposes: to help Americans buy electric cars and to help American automakers compete without relying on China for raw materials.
Buyers are subject to certain income limits, and vehicles to price caps. To qualify, an SUV or truck must cost $80,000 or less. A car must cost $55,000 or less.
Vehicles, meanwhile, must meet trade restrictions that grow stricter every year. Beginning Jan. 1, 2025, at least 60% of its battery must be built in North America to qualify for half of the credit, and at least 60% of certain critical minerals found in the battery must be sourced from the U.S. or certain trade partners to qualify for the other half.
Those restrictions ladder up by 10% a year. The increasing standard is designed to help American automakers build supply chains that exclude China.
It Typically Grows Again Soon
The list typically shrinks every January, as automakers that qualified under the prior year’s rules often haven’t fully updated supply chains to be eligible under stricter new rules.
It typically grows again as the year goes on. Automakers know the change is coming, and are usually working to increase their reliance on North American factories and minerals mined in allied countries. But they don’t always make the Jan. 1 deadline.
The act has largely worked. Many automakers have moved factories to the U.S. or built new battery factories here.
But such moves take time. New mining operations, in particular, develop and expand slowly. Often, we see a car that doesn’t qualify in January qualify again a few months later, as automakers obtain minerals from new sources.
If you’re considering a new EV and don’t see it on the qualifying list, remember that it may appear again in a few months.
The Rules Don’t Affect Leased Cars
You might also qualify for the tax rebate by leasing. The IRS waives all location restrictions, price caps, and income limits for leased cars. Every leased EV qualifies, as does every lessee.
Qualifying Cars
The following cars currently qualify, though some trim levels of these cars can be too expensive to fall under price caps.
The $7,500 Discount Could Go Away in 2025
President-elect Donald Trump will take office in seven days, and has suggested that he’d like to end the tax credit program entirely.
Trump can’t do that on his own. The program was created by an act of Congress, and only Congress could end it. It’s far from clear that a narrowly divided Congress would do that, particularly with many of the new factories providing jobs in heavily Republican states.
But, while a new administration couldn’t end the rebate program on its own, it could write new rules making it difficult for Americans to access the credit.