If price is the big reason you haven't bought an electric vehicle yet, there's great news in 2024. Getting a fat EV tax credit or rebate for buying or leasing an electric vehicle just got a lot easier — and faster. The bad news? Fewer cars and trucks qualify for the credits in 2024.
The federal tax credit for EVs, up to $7,500, is going to get easier to pocket in 2024. As of Jan. 1, EV buyers no longer have to wait until they do their taxes to get the credit. In the new year, EV buyers can now ask for that money at the time of purchase.
Unfortunately, it won't be a handful of cash at the dealership. Essentially, the dealer will advance you the credit, by reducing the loan or using it for a down payment. The IRS will pay the dealer back.
Getting The EV Tax Credit Sooner
Even better: With interest rates rising, reducing the amount of your car loan from the start is a smart money move.
According to recent data from Experian, the average loan amount for new cars is about $40,000 and the average interest rate is a little over 7%.
While EVs generally cost more than conventional vehicles, the price gap between the two is rapidly closing. According to Cox Automotive, the parent of Kelley Blue Book, the average price for electric cars was $53,469 in 2023. Tesla contributed to a substantial drop in EV prices as it cut prices.
Depending on your trade in value and/or down payment, the EV tax credits, which range from $3,750 to $7,500, could save you hundreds or thousands of dollars in loan interest.
Fewer Models Qualify In 2024
Due to tightening requirements for EV battery components, fewer models are on the list for tax credits as of Jan. 1. If you got your new EV in 2023, you had 34 models to choose from. So far this year, there are only 20.
However, manufacturers say they are working to make modifications and to get documentation so they can get some of their most popular models back on the list. These include the Ford Mustang Mach-E and Volkswagen's ID.4.
Ten Most Important EV Tax Credit Rules In 2024
Here are the 10 most important things to know about the 2024 EV tax credits as of Jan. 1:
- A tax credit of up to $7,500 is available on new and used EVs that meet certain criteria.
- The amount of the tax credit depends on where the EVs are made, where their battery components and minerals come from, how much they cost, and the buyer's annual income.
- The credit will be available for eligible buyers as a discount at the dealership when they buy the vehicle. No more waiting for tax season.
- To qualify, the EV must be manufactured in North America and have an MSRP below $80,000 for an SUV and $55,000 for a sedan, wagon, or hatchback.
- To qualify for the first $3,750, some of the EV's battery components must be produced or assembled in North America.
- To get another $3,750 (for the full $7,500 tax credit) a portion of the critical minerals in the EV battery must be mined or processed in the U.S. The minerals also could come from a country that is a U.S. free-trade agreement partner. Or, they must have been made from materials recycled in North America.
- The percentages of the components or minerals that need to be sourced under those rules go up every year, beginning this year.
- Starting in 2024, EVs with components from countries that have been designated "foreign entities of concern" (FEOC) will no longer be eligible for a tax credit. FEOC includes entities that are owned by, controlled by or subject to the jurisdiction or direction of a government of a foreign country that is a covered nation. Covered nations currently include China, Russia, Iran, and North Korea.
- The tax credit is nonrefundable.
- Check to be certain your dealer can give you the EV Tax credit. The dealer must be registered on a new platform, IRS Energy Credits Online, for a buyer to receive a point-of-sale EV tax credit.
States, Carmakers Add Incentives To Tax Credits
Federal EV tax credits are just one factor that are driving a buying boom. Some cars and trucks also qualify for a state rebate or tax credit. Together, those incentives could cut as much as $15,000 off the price of a new EV. And falling prices and a surge in new models of electric vehicles combine to make this big-ticket purchase less of a splurge.
General Motors has waffled in its intent to end production of the very popular Bolt EV and EUV. GM said earlier this year it would reintroduce a new Bolt EV. Now it's decided to ditch the original hatchback and instead only bring the Bold EUV onto its Ultium battery platform. The Bolt has always been one of the most affordable EVs.
This confluence of financial carrots is why EV sales in the U.S. rose fast in 2023. That growth rate was faster than the car market as a whole, but slower than in previous years. Carmakers are pinning hopes of big EV sales on new, lower-priced models. They, as well as EV buyers, anticipate better availability of public chargers.
Tesla deliveries in the fourth quarter exceeded Wall Street predictions, as the global EV giant sold a record-setting number of vehicles in Q4 and hit full-year expectations, the company reported Tuesday.
However, Chinese rival BYD surpassed Tesla in battery electric vehicles for the first time, with BEV sales of 526,409 in the fourth quarter.
Bumpy Road Ahead For EV Battery Market
Buyer enthusiasm for EVs slowed in December. As a result, Tesla, Ford, Rivian Automotive, and others started scaling back battery manufacturing plans. Analysts and executives are keeping an eye on sales figures to see what 2024 will look like.
The entire EV and battery supply chain has come under scrutiny, with consequences both for EV battery stocks and other EV stocks.
Credits And Incentives Boost Global EV Sales
The U.S. ranks third globally in EV sales, after the China EV market and Europe. The U.S. market climbed 55% in 2022, reaching a sales share of 8%, according to the Global EV Outlook from the International Energy Agency. Despite a slowdown in the fourth quarter of 2023, analysts are still expecting year-over-year growth in global sales of about 34%.
The growing popularity of EVs is forceful enough to shift the entire economy. Changes ahead for the global auto industry have major implications for the energy sector, the IEA says. And the electrification trend could reduce the need for 5 million barrels of oil a day by 2030.
IEA Executive Director Fatih Birol said, "Electric vehicles are one of the driving forces in the new global energy economy that is rapidly emerging, and they are bringing about a historic transformation of the car manufacturing industry worldwide."
Read More About Tesla's Stock And Company News
EV Prices And Tax Credits Power The Switch
But lower sticker prices only tell part of the story. U.S. car buyers enjoy other solid incentives to switch to an electric vehicle. They include the federal income tax credit of up to $7,500 for some new EVs. And don't forget added rebates and other perks from state and local utilities.
While this nest of incentives sounds complicated — and it is — it's also worth thousands of dollars in savings. It's worthwhile to check out eligibility and available perks when shopping for an EV.
Promoting clean energy use was just one facet of 2022's Inflation Reduction Act. The IRA extended federal EV tax credits for another decade and included eligibility for used EVs. But it also added complex restrictions such as a price cap, income limitations and final assembly rules.
With the shift in regulations and availability of new cars, how do you maximize your EV tax credits in 2024?
Who Qualifies For The EV Tax Credit
You may qualify for an EV tax credit of up to $7,500, according to the IRS, if you buy a new, qualified plug-in EV or fuel cell electric vehicle. The credit is available to individuals and their businesses. To qualify, you must buy it for your own use, not for resale, and use it primarily in the U.S. Also, your modified adjusted gross income (AGI) may not exceed $300,000 for married couples filing jointly or $225,000 for heads of households. The AGI limit is $150,000 for all other filers. Those numbers stay the same for 2024.
The IRS rules on EV tax credits, including how buyers qualify and which vehicles qualify should be checked for updates.
You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. As long as your modified AGI is below the threshold in one of the two years, you can claim the credit. The credit is nonrefundable, so you can't get back more on the credit than you owe in taxes. And you can't apply any excess credit to future tax years.
Used EVs Can Qualify, Too
While these rules apply to EV credits for new electric vehicles, Congress threw in another carrot. If you buy a qualified used EV or fuel cell vehicle from a licensed dealer for $25,000 or less, you may be eligible for a used EV tax credit.
The credit equals 30% of the sale price up to a maximum credit of $4,000. The credit is nonrefundable, so you can't get back more on the credit than you owe in taxes. You can't apply any excess credit to future tax years.
The EV Lease Loophole
The Inflation Reduction Act placed new and significant limits on which vehicles qualify for the EV tax credits. The EV has to be built in the U.S., Canada, or Mexico; the battery cells must use minerals from a specific list of countries; and the cells and packs have to be made in the U.S. But buyers can get federal tax credits for models not on the list allowed by the Inflation Reduction Act if they lease them.
In the IRA, Congress exempted commercial vehicles from the restrictions. While "commercial" is a term usually applied to vehicles like heavy-duty trucks, the Treasury Department defines leased EVs as "commercial" vehicles. Any leased vehicle may qualify for the tax credit because the North American battery-content and manufacturing rules do not apply to commercial vehicles.
When a dealer buys a vehicle and then leases it to a driver, the Treasury says that's a commercial transaction because the driver doesn't take title. This means the dealer or the finance company holding the lease receives the tax credit. Industry representatives and carmakers say the EV tax credit is lowering the price of leases and increasing incentive programs.
The Department of Energy's Alternative Fuels Data Center provides updated state-by-state information on rebates and incentives.
Get Your Federal EV Tax Credit — 2024
If your head is spinning from all the rules but you want to maximize your EV tax credit, Investor's Business Daily did the work for you.
The first table below includes the 20 vehicles that currently qualify for the federal tax credits for plug-in EVs and fuel cell EVs placed in service as of Jan. 1, 2024.
The IRS, meanwhile, says "some qualified manufacturers have yet to submit information on eligible vehicles that meet the current requirements." See all the details for various levels of EV tax credits at fueleconomy.gov.
Also important: For you to receive the credit, the dealer must confirm that your specific vehicle qualifies and must provide you with an IRS time-of-sale report.
Cars and Trucks That Qualify For The EV Tax Credit In 2024
| Make | Model | Year | Credit Amt | MSRP Limit |
|---|---|---|---|---|
| Chevrolet | Bolt EUV | 2022-2023 | $7,500 | $55,000 |
| Bolt EV | 2022-2023 | $7,500 | $55,000 | |
| Chrysler | Pacifica PHEV | 2022-2024 | $7,500 | $80,000 |
| Ford | Escape Plug-in Hybrid | 2022-2024 | $3,750 | $80,000 |
| F-150 Lightning (Extended Range Battery) | 2022-2024 | $7,500 | $80,000 | |
| F-150 Lightning (Standard Range Battery) | 2022-2024 | $7,500 | $80,000 | |
| F-150 Lightning (Standard Range Battery) | 2022-2024 | $7,500 | $80,000 | |
| Jeep | Grand Cherokee PHEV 4xe | 2022-2024 | $3,750 | $80,000 |
| Wrangler PHEV 4xe | 2022-2024 | $3,750 | $80,000 | |
| Lincoln | Corsair Grand Touring | 2022-2024 | $3,750 | $80,000 |
| Rivian | R1S Dual Large | 2023-2024 | $3,750 | $80,000 |
| R1S Quad Large | 2023-2024 | $3,750 | $80,000 | |
| R1T Dual Large | 2023-2024 | $3,750 | $80,000 | |
| R1T Dual Max | 2023-2024 | $3,750 | $80,000 | |
| R1T Quad Large | 2023-2024 | $3,750 | $80,000 | |
| Tesla | Model 3 Performance | 2023-2024 | $7,500 | $55,000 |
| Model X Long Range | 2023-2024 | $7,500 | $80,000 | |
| Model Y All-Wheel Drive | 2023-2024 | $7,500 | $80,000 | |
| Model Y Performance | 2023-2024 | $7,500 | $80,000 | |
| Model Y Rear-Wheel Drive | 2024 | $7,500 | $80,000 |
Source: Internal Revenue Service fueleconomy.gov. Data for the 2024 table was updated Dec. 30, 2023.
Vehicles That Qualify For The EV Tax Credit In 2023
The table below, from 2023, includes all 24 vehicles that qualify for the full $7,500 credit when placed into service from April 18, 2023 to Dec. 31, 2023. It also shows an additional 10 vehicles that qualify for a credit of $3,750.
| Make | Model | Year | Credit Amt | MSRP Limit |
|---|---|---|---|---|
| BMW | X5 xDrive50e | 2024 | $3,750 | $80,000 |
| Cadillac | LYRIQ | 2023-2024 | $7,500 | $80,000 |
| Chevrolet | Blazer | 2024 | $7,500 | $80,000 |
| Bolt | 2022-2023 | $7,500 | $55,000 | |
| Bolt EUV | 2022-2023 | $7,500 | $55,000 | |
| Equinox | 2024 | $7,500 | $80,000 | |
| Silverado | 2024 | $7,500 | $80,000 | |
| Chrysler | Pacifica PHEV | 2022-2023 | $7,500 | $80,000 |
| Ford | E-Transit | 2022-2023 | $3,750 | $80,000 |
| Escape Plug-in Hybrid | 2022-2023 | $3,750 | $80,000 | |
| F-150 Lightning (Extended Range Battery) | 2022-2023 | $7,500 | $80,000 | |
| F-150 Lightning (Standard Range Battery) | 2022-2023 | $7,500 | $80,000 | |
| Mustang Mach-E (Extended Range Battery) | 2022-2023 | $3,750 | $80,000 | |
| Mustang Mach-E (Standard Range Battery) | 2022-2023 | $3,750 | $80,000 | |
| Jeep | Grand Cherokee PHEV 4xe | 2022-2023 | $3,750 | $80,000 |
| Wrangler PHEV 4xe | 2022-2023 | $3,750 | $80,000 | |
| Lincoln | Aviator Grand Touring | 2022-2023 | $7,500 | $80,000 |
| Corsair Grand Touring | 2022-2023 | $3,750 | $80,000 | |
| Rivian | R1S | 2023 | $3,750 | $80,000 |
| R1T | 2023 | $3,750 | $80,000 | |
| Tesla | Model 3 Long Range All-Wheel Drive | 2023 | $7,500 | $55,000 |
| Model 3 Performance | 2022-2023 | $7,500 | $55,000 | |
| Model 3 Standard Range Rear-Wheel Drive | 2022-2023 | $7,500 | $55,000 | |
| Model Y All-Wheel Drive | 2022-2023 | $7,500 | $80,000 | |
| Model Y Long Range All-Wheel Drive | 2022-2023 | $7,500 | $80,000 | |
| Model Y Performance | 2022-2023 | $7,500 | $80,000 | |
| Volkswagen | ID.4 AWD PRO | 2023 | $7,500 | $80,000 |
| ID.4 AWD PRO S | 2023 | $7,500 | $80,000 | |
| ID.4 AWD PRO S PLUS | 2023 | $7,500 | $80,000 | |
| ID.4 PRO | 2023 | $7,500 | $80,000 | |
| ID.4 PRO S | 2023 | $7,500 | $80,000 | |
| ID.4 PRO S PLUS | 2023 | $7,500 | $80,000 | |
| ID.4 S | 2023 | $7,500 | $80,000 | |
| ID.4 STANDARD | 2023 | $7,500 | $80,000 | |
Source: Internal Revenue Service/fueleconomy.gov. The IRS notes that some qualified manufacturers have yet to submit information on eligible vehicles that meet the requirements for vehicles placed in service on or after April 18, 2023.
