Updated February 4, 2025
By Rick Cotta
Below are separate lists of Electric Vehicles (EVs) and Plug-in Hybrid Electric Vehicles (PHEVs) eligible for all or part of the Clean Vehicle Credit as of early February, 2025. Note that several vehicles that were eligible for the credit in calendar 2024 didn’t make the cut for 2025 due to tighter restrictions that took effect January 1, 2025. Also note that vehicles can be added (or potentially deleted) throughout the year.
Taking effect on January 1, 2024, was that any tax credit for which you are eligible can be applied at the time of sale — sort of like an instant rebate — rather than having to wait until you file your taxes. That makes it much more convenient (as you don’t have to wait until you file your taxes), plus it could be used toward a down payment. However, due to the restrictions on buyer income, it can get tricky to figure out whether a buyer is eligible for the tax credit. The buyer’s income wouldn’t likely be known for the current year, and — if the purchase is made early in the year — they may not yet know their previous-year’s income, either. Dealers should be versed on this new policy, but it can be tricky for them as well. Keep in mind that you should bring your tax info (ideally, any applicable tax returns) with you when you visit your dealer. More on this under the EV Tax Credit Info heading beneath the list of PHEVs eligible for a Tax Credit.
Note that the following lists of eligible vehicles can change with both adds and deletions. A current list can be found at the following URL (It’s not a link; you’ll need to copy it into your internet browser’s address bar): https://fueleconomy.gov/feg/tax2023.shtml Scroll down the page and you’ll see a pulldown menu, “Filter table by ….” Fill in the appropriate selections to get the list. Be aware that some vehicles on the list that were built early in the model year may not be eligible for the tax credit, so it’s best to check with the dealer as to whether the specific vehicle you’re looking at is eligible.
Also: There are numerous rules affecting the eligibility of both the vehicles and the buyers, including limits on the buyer’s income. If you’re not familiar with these rules, they’re covered below the following EV and PHEV eligible-vehicle listings under the heading, EV Tax Credit Info.
__________________________________
EV Tax Credit Info
When the Inflation Reduction Act was passed in August of 2022, it included a Clean Vehicle Credit to replace the former EV Tax Credit.
In virtually every sense, the Clean Vehicle Credit is far more complicated and restrictive than the old tax credit, though it adds credits for used EVs and commercial EVs. It’s important to note that the Clean Vehicle Credit includes restrictions not only on which EVs qualify for the tax credit, but also which buyers do, based on income.
It’s also worth noting that in order to take full advantage of any tax credit offered, you have to have at least that much in tax liability, as any remainder can’t be carried over. You can choose whether to use your income from the year you purchased the car — which you likely wouldn’t know yet — or the previous year (which you also may not know yet). Otherwise, you can only get back as much as you have in tax liability. If you’re not sure where you stand in this regard, it might be worth consulting with a tax professional, but the following can be used as a guideline:
- For the 2023 tax year (the forms for 2024 tax year have not yet been studied), your tax liability based on common forms of income is listed on Form 1040 Line 16. (This would indicate whether you could take full advantage of all the tax credit offered on your vehicle.) Note, however, that some, “other-than-common forms of income” may need to be added to the Line 16 total. See below.
- Quoting an IRS document dated October 2023 (with bold added here) outlining the income limitations and also what constitutes your “income” for purposes of the tax credit:
“You may not claim the credit if your modified adjusted gross income (AGI) exceeds certain thresholds. This limitation is based on the lesser of your modified AGI for the year that the new clean vehicle was placed in service or for the preceding year. The relevant modified AGI thresholds are as follows:
Married filing jointly or filing as a qualifying surviving spouse or a qualifying widow(er) – $300,000
Head of household – $225,000
All other taxpayers – $150,000
Your modified AGI for 2023 (2024 tax forms have not yet been studied) was the amount from line 11 of your Form 1040 plus:
Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income.
Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa.
If your filing status changes between the preceding year and the current year, you may claim the new clean vehicle credit if your modified AGI is less than or equal to the threshold applicable to your filing status for in the preceding year or current year.”
(See why this is quoted rather than an explanation?)
While major elements of the Clean Vehicle Credit are noted in bullet points below, each point will be explained in greater detail — with the same title — under the heading, “More Details,” further down.
New-Vehicle Restrictions
(Note that this is just an explanation as to why certain vehicles listed above made the cut for the credit and others didn’t.)
* Must plug in to charge (straight electric vehicle or a plug-in hybrid) or be powered by a fuel cell
* Must be built in North America (U.S., Canada, or Mexico). How to determine this is covered under the heading, “More Details,” below.
* Maximum MSRP (Manufacturer’s Suggested Retail Price) of $55,000 for cars, $80,000 for SUVs, pickups, and vans
* A certain percentage of the battery’s “critical minerals” (such as lithium) have to come from the U.S. or from countries with which the U.S. has a free-trade agreement. Meeting this requirements nets the buyer a $3450 tax credit. Note that the required percentage increases over time — on January 1 — which means the same vehicle might be eligible in one calendar year but not the next.
* A certain percentage of the battery’s components must be manufactured or assembled in North America. Meeting this requirements nets the buyer a $3450 tax credit. Note that the required percentage increases over time — on January 1 — which means the same vehicle might be eligible in one calendar year but not the next.
* If any of the vehicle’s battery components including critical minerals are manufactured or assembled by a “foreign entity of concern,” the vehicle would not be eligible for any tax credit. Although the countries of China, Russia, Iran, and North Korea have been specified as foreign entities of concern, it could conceivably be a company within a country.
Note: Dropped was the previous provision that reduced and then eliminated the credit for manufacturers after 200,000 EVs were sold. That means General Motors (primarily Chevrolet), Tesla, and Toyota EVs and plug-in hybrids are once again eligible for the tax credit.
New-Vehicle Buyer Income Limits
* $150,000 if single, $225,000 if head of a household, $300,000 if filing jointly
* Figure is based on Modified Adjusted Gross Income
* Buyer can choose to base their income either on that of the year the EV was purchased, or from the previous year
Used EVs
* Maximum tax credit is $4000 or 30% of the sale price, whichever is lower
* Has to be purchased from a dealer
* Has to be at least two model years old
* Can cost no more than $25,000
* Any given vehicle is only eligible one time
* Buyer cannot be a previous owner of the vehicle
* Buyer income limits: $75,000 for an individual, $112,500 for a head of household, $150,000 for those filing jointly.
* Buyer is only eligible for a used-EV tax credit once every three years.
Commercial Vehicles
Although it sounds as though these rules would apply to big delivery vans and trucks — which are outside our scope here — it ‘s been established that leased passenger vehicles would fall under this category. (The leasing company being the “commercial” enterprise.) However, the rules are a bit complicated, as they include the difference in cost between the EV or plug-in hybrid version of the vehicle in question vs. a similar one powered by a gas or diesel engine.
Furthermore, while the tax credit is $3450 or $7500 for purchased passenger vehicles, there’s nothing that states how much of the commercial credit — if any — has to be passed on to the consumer for a leased passenger vehicle. So this is not a cut-and-dried dollar amount.
But on the positive side, there are no restrictions on where the vehicle is built, the sources for battery components, or maximum price, so far more vehicles qualify for the commercial-vehicle tax credit. There are also no income limits on the buyer, so more people will qualify for them as well.
More Details
New-Vehicle Restrictions
* Must plug in to charge (straight electric vehicle or a plug-in hybrid) or be powered by a fuel cell.
The plug-in requirement is the same as before.
* Must be built in North America (U.S., Canada, or Mexico)
This eliminates a lot of current EVs from eligibility, and though it may sound cut and dried, it can be a little hazy from a buyer’s perspective. That’s because some EV models are built in more than one country, and that may apply to even more once some manufacturers start opening EV plants in the U.S.
For instance, the Volkswagen ID.4 — which debuted for the 2021 model year — was originally built in Germany. However, in the fall of 2022, Volkswagen began building ID.4s in a new factory in Tennessee. Those built in Germany didn’t qualify for any tax credit, while some of those built in Tennessee did. Other manufacturers — such as Hyundai and Kia — have started building EVs in the U.S., so those would meet the “Built in North America” criteria. But that doesn’t necessarily apply to all trim levels of those vehicles, nor does it apply to earlier versions that were built outside North America — so you have to be careful to check if the vehicle you’re considering qualifies.
How can you tell where a vehicle is built?
The country of a new vehicle’s final assembly is noted in at least two places: on the window sticker, and as part of the VIN. The VIN (Vehicle Identification Number) can be found on a sticker on the driver’s-side door jamb, as well as on a plate located on the top of the dashboard near the base of the windshield on the driver’s side. (You can usually see it by looking through the windshield.) The VIN is 17 characters long (a mix of letters and numbers), and the first character indicates the country of final assembly. For those assembled in the U.S., the first character is a 1, 4, or 5, while those built in Canada start with a 2, those built in Mexico with a 3. So any vehicle with the first character of the VIN being 1 through 5 are built in North America.
What might also be helpful is that the vehicle’s model year is indicated by the 10th character of the VIN. For recent and near-future years, L = 2020, M = 2021, N = 2022, (O is skipped), P = 2023, (Q is skipped), R = 2024, S = 2025, T = 2026, (U is skipped), V = 2027, W = 2028, X = 2029.
* Maximum MSRP (Manufaturer’s Suggested Retail Price) of $55,000 for cars, $80,000 for SUVs, pickups, and vans.
The price cap includes any options, but not the destination charge. Those are fairly easy to establish just by looking at the vehicle’s window sticker.
Note that there’s nothing in the rules that take inflation into account. As these rules will essentially be in effect for a decade (they run through December 31, 2032), higher prices due to inflation could mean a lot fewer vehicles would get under their respective price caps.
* A certain percentage of the battery’s “critical minerals” (such as lithium) have to come from the U.S. or from countries with which the U.S. has a free-trade agreement. Meeting this requirements nets the buyer a $3450 tax credit.
This percentage is based on the value of the minerals, the price of which — like other commodities — can fluctuate. It is not stated in the rules how this might affect a vehicle’s eligibility during the course of a given year, nor at what point the value is determined.
* A certain percentage of the battery’s components must be manufactured or assembled in North America. Meeting this requirements nets the buyer a $3450 tax credit.
This percentage is also based on value, which could likewise fluctuate.
It is the last two points that have caused so much confusion and uncertainty — and not just due to the “value” question.
The rules state that the percentages for both increase almost annually through the end of the decade, and the “jumps” take place on January 1 — in the middle of a traditional model year. (The Clean Vehicle Credit is set to expire at the end of 2032.) That means an early 2025 model of a vehicle could qualify for a credit, but after January 1, 2025, it may not — and this is based on the date of delivery (in other words, when it’s taken possession of by the buyer). This could cause a lot of confusion, and who’s responsible for determining whether a 2025 model is eligible or not — the dealer, or the buyer?
* If any of the vehicle’s battery components including critical minerals are manufactured or assembled by a “foreign entity of concern,” the vehicle would not be eligible for any tax credit.
The “battery components” restriction was added in 2024, the “critical minerals” for 2025. Although the countries of China, Russia, Iran, and North Korea have been specified as foreign entities of concern, it could conceivably be a company, perhaps one that is controlled by one of those countries, or has stolen trade secrets or violated patents. It’s just one more hurdle to validate and clear.
New-Vehicle Buyer Income Limits
* $150,000 if single, $225,000 if head of a household, $300,000 if filing jointly
* Figure is based on Modified Adjusted Gross Income
* Buyer can choose to use income either from the year the EV was purchased, or from the previous year
While a person’s Adjusted Gross Income typically has had its own line number on the 1040 tax form (Line 11 for 2021) — and is thus easily discerned — one’s Modified Adjusted Gross Income (“Modified” usually taking into account certain credits and additional income) has no set line number. So if you’re right on the borderline, things could get tricky.
As with vehicle price limits, the income rules don’t take inflation into account. Over the course of the roughly ten years these rules apply, higher wages would mean fewer buyers would qualify under the income limits.
As has always been the case, the buyer has to have at least $7500 in tax liability to take full advantage of a $7500 tax credit. If the amount of federal taxes they owe is only $5000, that’s all the credit they can take, as the balance can’t be carried over to the next year. However, due to the fact that the critical-minerals and battery-components elements of the rules are treated separately — each worth $3450 — a vehicle may qualify for one but not the other.
Used EVs
* Maximum tax credit is $4000 or 30% of the sale price, whichever is lower
* Has to be purchased from a dealer
* Has to be at least two model years old
* Can cost no more than $25,000
* Any given vehicle is only eligible one time
* Buyer income limits: $75,000 for an individual, $112,500 for a head of household, $150,000 for those filing jointly.
* Buyer is only eligible for a used-EV tax credit once every three years.
This may sound good, but there are downsides.
First, dealers tend to charge more than a private party for a given vehicle because they have to make a profit. Also, the sales tax they might have to charge may be higher than a transfer tax from an individual, and dealers often add document fees and other charges that a private party wouldn’t. So the “must buy from a dealer” provision might render the $4000 credit less attractive than it may initially seem.
Worse is that it’s apparently the buyer who is responsible for determining that they are the first to apply for the tax credit on a given vehicle. That can be difficult to verify, and it will be a bigger deal as time goes on. Furthermore, as wages rise with inflation, fewer buyers are going to fall under the income cap, and at the other end of the spectrum, a buyer has to have $4000 in tax liability to take the full credit.
Commercial Vehicles
As mentioned previously, what would normally be considered “commercial vehicles” — such as big trucks and delivery vans — are outside our scope. But the Commercial Vehicle Credit has been extended to include leased passenger vehicles (which are entirely in our scope), with the leasing company being the “commercial” entity.
Whether the credit is applied to a big truck or a leased passenger vehicle, the rules are the same … and they’re complicated. The credit (quoting a Congressional Research Service report), “… is 15% of a qualifying vehicle’s cost (30% if the vehicle does not have a gas- or diesel-powered internal combustion engine) limited to the incremental cost of the vehicle relative to a solely gas or diesel powered vehicle. The credit for light-duty vehicles is limited to $7,500, while heavy-duty vehicles can qualify for tax credits of up to $40,000.”
Note that the dividing line between “light-duty“ and “heavy-duty” vehicles appears to be 14,000 lbs (well over the weight of a traditional passenger vehicle), and there’s a minimum battery capacity of 7 kWh for light-duty vehicles, 15 kWh for heavy-duty vehicles — both of which are small enough that they’d be for plug-in hybrids, not full electric vehicles.
If you’re a plumber buying a work van, you can probably figure out in advance how much of the tax credit you can take. But the credit a leasing company can get is more difficult to determine, and nothing says that any credit the company can take has to be passed on to the consumer. So while it’s great in theory, there’s some question as to how much it’s going to benefit someone leasing a passenger vehicle.
—————————- End —————————-
0 Comments