The EV tax credit: all the cars, rules, and updates

Volkswagen’s flagship electric vehicle, the ID.4 crossover SUV, is eligible for the full $7,500 federal EV tax credit, the automaker announced Wednesday. The federal government’s list of eligible vehicles has since been updated to include all trim levels of the ID.4.

Volkswagen is currently the only international automaker to have a full battery electric vehicle that is eligible for the full credit. The ID.4 is assembled in Chattanooga, Tennessee, which is one of the prerequisites for eligibility. Earlier this week, the federal government released its list of EVs that qualify for the tax credit. The VW ID.4 was initially left off, but as of today, it’s back on.

The Internal Revenue Service released its list of electric vehicles that will still qualify for the $7,500 federal EV tax credit after strict new supply chain rules go into effect on April 18th. And oh boy, is it short.

Big winners include Tesla, Ford, Chrysler, Jeep, and General Motors. Gone from the list are heavy hitters like Volkswagen, BMW, Nissan, Hyundai, and Rivian. The revised list is sure to change as more battery factories come online in the US, but for now, the list of qualifying vehicles is significantly shorter than its ever been.

The Biden administration released a long-awaited update to the rules governing which electric vehicles are eligible for a tax credit, and while we still don’t know which vehicles will meet the new standards, one thing is for sure: fewer EVs are going to qualify.

The new rules, which were published by the Treasury Department on Friday, address outstanding issues related to the source of the critical minerals contained within an EV battery. Under the Inflation Reduction Act (IRA), only electric vehicles with battery materials sourced from the US and its approved trading partners will qualify for the $7,500 credit. 

Lucid is giving buyers a $7,500 credit when purchasing some models of its luxury Air electric sedans. The company is the latest EV maker to offer a discount in what some auto industry experts see as a slowly developing price war for plug-in models.

“The credit is applied at the time of purchase and will appear on the purchase agreement,” Lucid’s public relations manager for technology Justin Berkowitz tells The Verge.

Tesla raised the price of its Model Y electric vehicle (EV) just hours after the US Treasury Department adjusted its EV tax credit rules, as first reported by Bloomberg. While the Tesla Model Y Long Range now costs $1,500 more at $54,990, the Model Y Performance went up by $1,000 to $57,990, excluding shipping fees.

On Friday, the Treasury Department updated the way it classifies vehicles that qualify for its $7,500 EV tax credit as part of the Inflation Reduction Act (IRA). The change should allow more vehicles — including the Model Y — to qualify for the credit, as it no longer puts certain SUV crossovers in the same category as sedans.

The US Treasury Department says it is modifying the electric vehicle tax credit to potentially allow more vehicles to qualify — for now.

In a press release, the department said that to determine whether a vehicle is a sedan, SUV, pickup truck, or van, it would use the Environmental Protection Agency’s Fuel Economy Labeling standard rather than the EPA’s corporate average fuel economy, or CAFE, standard.

West Virginia Senator Joe Manchin (D) introduced a new bill that would halt the current electric vehicle tax credit until strict new battery requirements are put in place. It’s the latest move by the conservative Democrat to limit the government’s ability to incentivize car buyers to shift to less polluting vehicles.

Manchin, who had a hand last year in crafting the EV tax credit that was included in the Inflation Reduction Act (IRA), placed the blame on the Internal Revenue Service for blowing past its December 31st, 2022 deadline to release guidance on the battery requirements.

If you were waiting until after New Year to pick up a Tesla Model Y in hopes it’d qualify you for the new federal tax credit, you might be in for a disappointment. The IRS released a 2023 list of vehicles that qualify for the new $7,500 incentive, and while Tesla’s popular SUV is on it, the most common five-seater versions won’t be eligible.

According to EPA classifications, all versions of the Tesla Model Y are supposed to be under the “small SUV” category. But it would seem the IRS is treating five-seater and seven-seater models differently for tax eligibility, the former being treated as a car and the latter as an SUV.

As of January 1st, 2023, a bunch of electric vehicles became newly eligible for the $7,500 tax credit, which passed into law as part of the $430 billion Inflation Reduction Act a year ago.

Some models new to the list had lost their eligibility when their manufacturer hit the previous credit’s sales cap of 200,000 vehicles (Tesla models, Chevy Bolts). Others have recently shifted their production to North America, meeting one of the crucial requirements (VW ID.4).

Besides its more obvious stated goal of reducing inflation, the Biden administration’s Inflation Reduction Act (IRA) was designed to force profound changes in the electric vehicle market. The legislation revises EV tax credit rules as it seeks to build up domestic battery manufacturing so that the US doesn’t cede the supply chain to China. 

It’s also profoundly confusing, hinging new EV tax credits not just on where the cars are built but also where batteries are assembled and where battery materials are sourced from. These rules were all supposed to take effect on January 1st, 2023 — that’s next weekend for anyone keeping track. 

The Biden administration launched a new website — CleanEnergy.gov — aimed at helping Americans navigate the new green energy tax credits contained in the Inflation Reduction Act of 2022 (IRA). That could especially be useful for people looking to buy a new electric vehicle but finding themselves confused by the litany of new requirements about assembly and battery materials.

The $739 billion measure carries a host of tax credits and discounts on everything from EVs to solar energy to regular appliances like refrigerators, stoves, and washing machines. The new website is designed to help Americans save money on home upgrades or new purchases while also steering them toward cleaner, more efficient products.

The auto industry is still processing the new and confusing electric vehicle credits signed into law by President Joe Biden as part of the Inflation Reduction Act of 2022. Foreign automakers, in particular, are scrambling to find some loophole through the new rules that would seem to disqualify the vast majority of their EV fleets, while others are speeding up plans to build new factories in the US.

EVs built outside North America are not eligible for the $7,500 tax credit. The law also includes provisions aimed at preventing use of battery components or critical minerals derived from China, which currently controls around three-fourths of the global battery market.

Are you in the market for a new electric car? Great! EVs are swiftly becoming the most sought-after new vehicle. They’re fun to drive and are clearly better for the environment than whatever gas-powered beater you’ve got darkening your driveway.

But shopping for a new EV is hard — expensive! limited supplies! wait lists?? — and unfortunately Congress and President Joe Biden just swooped in to make it even harder. On Tuesday, Biden signed the sweeping Inflation Reduction Act of 2022, the nation’s most significant climate bill ever passed into law. One of the major parts of the bill is new tax credits for electric vehicles.

Volkswagen “cannot guarantee” that its ID.4 compact electric SUV will be eligible for the new electric vehicle tax credits that are set to go into effect after President Joe Biden signs the Inflation Reduction Act. The automaker isn’t alone in its confusion.

The auto industry is scrambling to adjust to the new rules requiring that EVs must be assembled in North America, using parts and supplies sourced domestically or from official trading partners, in order for customers to qualify for the $7,500 tax credit. Most EVs have batteries that are sourced from China, meaning the new rules are written in such a way as to effectively disqualify the vast majority of EVs on the road today.

Congress is poised to approve newly expanded tax credits for electric vehicles, but the rules are written in such a way as to effectively disqualify every EV that’s currently on the market today.

That’s because most EVs run on lithium-ion batteries that are mostly made in China. The nation has a lock on some 76 percent of the battery market today (the US only represents 8 percent). And to get a deal passed in a deadlocked Senate, Democrats agreed to provisions that would require eligible vehicles to use batteries that are made in North America.

Senator Joe Manchin has had a change of heart about electric vehicles.

The West Virginia Democrat, who previously described federal tax credits for EVs as “ludicrous,” announced a surprise deal with Senate Majority Leader Chuck Schumer on a reconciliation package that includes $369 billion for climate and energy measures aimed at slashing carbon emissions by 40 percent by 2030.