Skip to Content
MarketWatch

How electric vehicle tax credits will work in 2024, and a list of cars that qualify

By Renee Valdes

Add in state and local rebates, and the new tax credits can can make a dent in the cost of buying a zero-emission vehicle

Quick facts about federal incentives for electric cars

EV buyers can take advantage of federal tax credits on eligible electric vehicles.For vehicles placed in service prior to April 18, a different list of electric cars qualify for the credit.The federal government placed income caps on the electric car tax credit eligibility.

Consumers considering an electric vehicle right now may want to weigh how tax credits on electric cars work and how they could affect any upcoming buying decisions. The IRS recently updated its list of 2024 electric vehicles that qualify for federal tax credits.

The Inflation Reduction Act includes electric vehicle tax credit provisions set to reshape how Americans buy electric cars and plug-in hybrids. The federal government continues to update the list of EVs that qualify for rebates. A recent update for battery manufacturing reduced the number of qualified vehicles on April 18, 2023.

Read on to learn the impact. The new tax credits can help defray the cost of buying a zero-emission vehicle when combined with state and local rebates.

Read: A hybrid just won 'vehicle of the year.' Here's why the EV case has been hard to crack.

How the new EV tax credits work

According to Kelley Blue Book research, electric car buyers spent $53,469 on average for a new EV purchase in August, down 19% since August 2022. The industry-wide average that includes gas-powered vehicles and electric cars reached about $48,451 in the same time frame.

Here's how the electric vehicle tax credits work in 2023 and 2024 (as of Nov. 7):

Extends $7,500 tax credit. The Inflation Reduction Act extends the current incentives of up to $7,500 in tax credits for select electric cars, plug-in hybrids, and hydrogen-powered vehicles that meet government qualifications. The federal government continues to update the list of qualifying vehicles.Caps EV price tags. The incentives restrict qualifying vehicles to low-emissions trucks, SUVs, and vans with manufacturer's suggested retail prices (MSRPs) of up to $80,000 and cars up to $55,000.Income caps to qualify for new cars. The rebates are limited to individuals reporting adjusted gross incomes of $150,000 or less on taxes, $225,000 for those filing as head of household, and $300,000 for joint filers.

   IRS Tax Filing Status          Adjusted Gross Income Limits 
   Single                         $150,000 
   Head of household              $225,000 
   Married and filing jointly     $300,000 
   Married and filing separately  $150,000 

Used electric vehicle rebate. Anyone considering a used electric car under $25,000 could obtain up to a $4,000 tax credit, subject to income and other limits. To qualify, used cars must be at least two model years old. The vehicle also must be purchased at a dealership. The vehicle also only qualifies once in its lifetime. Purchasers of used vehicles can only qualify for one credit every three years, and to qualify, individuals must meet income requirements (see below). The credit ends in 2032.

   IRS Tax Filing Status          Adjusted Gross Income Limits 
   Single                         $75,000 
   Head of household              $112,500 
   Married and filing jointly     $150,000 
   Married and filing separately  $75,000 

Leased vehicles may qualify. The IRS lets dealers claim credits of up to $7,500 on cars that are available for lease. Dealers, in turn, can apply that amount to the price of the vehicle before setting lease terms, effectively lowering the cost to shoppers.Discount upfront. In 2024, dealerships can offer instant EV tax rebates to qualifying customers on qualifying vehicles at the time of purchase. If the dealership does not offer it immediately, you can still request the credit on your taxes.No sales limits for manufacturers. As of Jan. 1, 2023, manufacturers like GM GM and Tesla TSLA were no longer limited on incentives to the first 200,000 EVs sold, which was the case under previous federal tax credits.Ineligible cars become eligible. Carmakers like Tesla and General Motors, which had run out of available credits under the old plan, became eligible for them again as of January 2023.New rules on EV battery manufacturing. To qualify for the subsidy, electric car batteries must have final assembly in the U.S., Canada, or Mexico, and the batteries' minerals and parts must also come from North America to qualify. These rules render many electric vehicles ineligible. The U.S. Treasury Department recently updated regulations that govern where battery minerals and parts must be sourced. A new list of vehicles published on April 18 says that cars qualify for a $3,750 benefit if the assembly of at least half the value of their battery components happens in North America. Cars qualify for a second $3,750 incentive if critical minerals used in the batteries, like cobalt and lithium, originate in the U.S. or its free-trade partners. Currently, the rules require 40% of battery content from such countries. That requirement ladders up to 80% in 2027. The department will use a similar, 3-part test to decide whether cars have met mineral standards.Hydrogen fuel-cell cars remain eligible. The $7,500 credit also applies to hydrogen fuel-cell cars like theToyota TM Mirai orHyundai HYMTF Nexo. However, those make sense only for buyers who live near one of America's few hydrogen refueling stations. Those stations are mostly concentrated in California.Home electric car chargers and installation costs get a rebate. Federal incentives include a 30% tax credit up to $1,000 for electric car chargers and installation costs. The tax credit extends through Dec. 31, 2032. To claim your credit, use IRS form 8911 and file with your federal tax returns.

List of 2023-2024 electric vehicles that qualify

According to the U.S. Internal Revenue Service, this is the latest list of electric and plug-in hybrid vehicles that qualify if placed in service on or after April 18, 2023. The list constantly changes as car manufacturers open assembly plants in the U.S. to meet the new requirements.

   Vehicle                                 Credit Amount  MSRP Limit 
   2024 BMW x-Drive50e PHEV                $3,750         $80,000 
   2023-2024 Cadillac Lyriq                $7,500         $80,000 
   2024 Chevrolet Blazer EV                $7,500         $80,000 
   2023 Chevy Bolt EV                      $7,500         $55,000 
   2023 Chevy Bolt EUV                     $7,500         $55,000 
   2024 Chevy Equinox EV                   $7,500         $80,000 
   2024 Chevy Silverado EV                 $7,500         $80,000 
   2023-2024 Chrysler Pacifica PHEV        $7,500         $80,000 
   2023 Ford                               $3,750         $80,000 
   2023 Ford Escape PHEV                   $3,750         $80,000 
   2023 Ford F-150 Lightning               $7,500         $80,000 
   2023 Ford Mustang Mach-E                $3,750         $80,000 
   2023-2024 Jeep Grand Cherokee 4xe PHEV  $3,750         $80,000 
   2023-2024 Jeep Wrangler 4xe PHEV        $3,750         $80,000 
   2023 Lincoln Aviator Grand Touring      $7,500         $80,000 
   2023 Lincoln Corsair Grand Touring      $3,750         $80,000 
   2024 Nissan Leaf S                      $3,750         $55,000 
   2024 Nissan Leaf SV Plus                $3,750         $55,000 
   2023 Rivian                             $3,750         $80,000 
   2023 Rivian R1T                         $3,750         $80,000 
   2023 Tesla Model 3 Standard Range RWD   $7,500         $55,000 
   2023 Tesla Model 3 Performance          $7,500         $55,000 
   2023 Tesla Model 3 Long Range AWD       $7,500         $55,000 
   2023 Tesla Model X Long Range           $7,500         $80,000 
   2023 Tesla Model Y AWD                   $7,500        $80,000 
   2023 Tesla Model Y Long Range AWD       $7,500         $80,000 
   2023 Tesla Model Y Performance          $7,500         $80,000 
   2023 Tesla Model Y RWD                  $7,500         $80,000 
   2023 Volkswagen ID.4                    $7,500         $80,000 

Recent Tesla price cuts on the base Model S may allow those vehicles to qualify for government tax credits. According to Tesla's website, some buyers can qualify for the full $7,500 EV tax credit on the base Model S, which is priced at $74,990 now, down from $104,990 on Jan. 1. The government's list of qualifying vehicles does not yet list the Model S among qualifying cars.

Check out: 18 new EVs to watch for in 2024

Vehicles placed in service between Jan. 1, 2023, and April 17, 2023 that qualify

This is the list of electric and plug-in hybrid vehicles that qualify for tax credits if placed in service between Jan. 1, 2023, and April 17, 2023.

   Vehicle                                         Credit Amount  MSRP Limit 
   2023 Audi Q5 TFSI e Quattro PHEV                $7,500         $80,000 
   2021-2023 BMW 330e PHEV                         $5,836*        $55,000 
   2021-2023 BMW X5 eDrive 45e PHEV                $7,500         $80,000 
   2022-2024 Cadillac Lyriq                        $7,500         $80,000 
   2022-2023 Chevy Bolt EV                         $7,500         $55,000 
   2022-2023 Chevy Bolt EUV                        $7,500         $55,000 
   2024 Chevy Silverado EV                         $7,500         $80,000 
   2022-2023 Chrysler Pacifica PHEV                $7,500         $80,000 
   2022-2023 Ford E-Transit                        $7,500         $80,000 
   2022 Ford Escape PHEV                           $6,843         $80,000 
   2023 Ford Escape PHEV                           $6,885         $80,000 
   2022-2023 Ford F-150 Lightning                  $7,500         $80,000 
   2022-2023 Ford Mustang Mach-E                   $7,500         $80,000 
   2023-2024 Genesis Electrified GV70              $7,500         $80,000 
   2022-2023 Jeep Grand Cherokee 4xe PHEV          $7,500         $80,000 

(MORE TO FOLLOW) Dow Jones Newswires

11-21-23 0503ET

Copyright (c) 2023 Dow Jones & Company, Inc.

Market Updates

Sponsor Center