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The Street

James Ochoa

These few vehicles qualify for the $7,500 federal EV tax credit

Tesla Inc. Chevrolet Kia Cadillac Ford Genesis Acura Chrysler Donald Trump General Motors

On Jan. 1, 2024, new rules that dramatically changed how the elusive federal EV tax credits were used went into effect.

The biggest change under the IRS' updated Code Section 30D allowed qualifying buyers under certain income thresholds to get up to a $7,500 tax credit directly applied to the purchase price of qualifying EVs that meet certain sticker price restrictions — or up to $4,000 for a used EV priced at or below $25,000 that is at least two model years old.

Though the new rules greatly benefited buyers, they also encouraged automakers to concentrate their EV supply chains within the United States rather than overseas.

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Last year, regulators restricted EVs with batteries from "Foreign Entities of Concern" (FEOC), specifically China, North Korea, Russia, and Iran. EVs with battery components made or assembled by a company or subsidiary based in those countries would not be eligible for the credit.

Additionally, qualifying EVs must have at least 50% of their materials sourced from North America or any country that the U.S. has free trade agreements with in order to be eligible for a $3,750 tax credit.

However, in order to qualify for a $7,500 credit, EVs must have at least half of their battery components sourced from North America and at least half of their raw materials sourced from a country that the U.S. has a free trade agreement with.

This plan helped accelerate EV and plug-in hybrid sales. By October 2024, data from the U.S. Department of the Treasury and the IRS showed that more than two billion dollars in tax credits had been given to buyers of qualifying vehicles since January.

A CarMax salesman shows a used Tesla Model Y electric vehicle (EV) to a customer at a dealership in Fremont, Calif. on Monday, Aug. 19, 2024.
Bloomberg/Getty Images

New electric vehicle rules begin in 2025

The transition to 2025 means that new rules will dictate which cars are eligible for the $7,500 electric vehicle tax credit.

The root of the changes is updated sourcing requirements. Not only can any battery material come from a "foreign entity of concern" like China, but automakers must be sure that 60% of a qualifying EV's critical battery minerals are mined or processed in the U.S. or one of its free-trade partners or recycled in North America.

These requirements are set to be restricted in the following years. In 2026, 70% of critical battery minerals must be mined or processed in the states, and will be 80% in 2027.

As a result, electric vehicles and plug-in hybrids made by Audi, Ford, Jeep, Lincoln, Rivian and Volkswagen that were previously qualified for tax credits in 2024 are no longer eligible as of Jan. 1. However, vehicles from Kia and Genesis, which did not have any qualifying vehicles last year, are now eligible for a full $7,500 EV tax credit.

More Business of EVs:

The EV benefits may not last forever

On Jan. 20, the man at the helm of the United States government will be changing.

It may not be President-Elect Donald J. Trump's first rodeo in the Oval Office as President, but as far as what policies his transition team teased, EV buyers and other Americans are in for a wild ride that may be different from his time in office from 2017 to 2021.

Just nine days after declaring victory in the 2024 presidential election, on Nov. 14, sources close to Trump's transition team told Reuters that the incoming president plans to kill the $7,500 consumer tax credit for EV purchases enabled by the Inflation Reduction Act.

In response, California Governor Gavin Newsom announced on Nov. 25 that if President-Elect Donald Trump follows through, the state of California will revive a program that gave its state residents up to $7,500 for EVs.

For now, just sixteen vehicles are eligible for tax credits. According to the government's portal at FuelEconomy.gov, these fifteen EVs and one plug-in hybrid are eligible for a full $7,500 EV tax credit. All prices include the destination charge but do not include the tax credit.