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

Ford and GM are both backing off their effort to continue offering the $7,500 electric vehicle tax credit to customers through the end of the year, Reuters is reporting.

Last week, it was revealed that the automakers were working with their respective dealer networks on short-term programs that would allow customers to continue to receive the tax credit on leased EVs through the rest of the year. With the tax credit expiring on September 30th, Ford and GM were hoping to keep offering the discount to customers for a short while in order to buoy EV sales.

Ford and GM have apparently worked up an interesting scheme to keep the expiring $7,500 federal EV tax credit from driving down sales. According to Reuters, the automakers are working with dealers on short-term programs that would allow customers to continue to receive the tax credit on leased EVs through the rest of the year.

The programs will operate under each automaker’s financing arm, according to documents viewed by Reuters and interviews with dealers briefed on the plan. It basically works like this: Ford and GM will buy EVs from its own dealers by having their finance divisions put down payments on all the electric models in their inventory before the tax credit expires. The dealers will then lease the vehicles to customers with a $7,500 discount baked into the price.

For EVs, it’s Zero Hour. When the clock strikes midnight on Oct. 1, the $7,500 federal tax credit on EVs will expire, potentially turning affordable electric carriages into showroom pumpkins.

Sales of electric cars are certain to dip. Real-world prices will rise. The only question is how much, and for how long, as President Donald Trump and his administration continue to go scorched-earth over climate change and kneecap support for electric cars and renewable energy.

Once Donald Trump won office for a second time, the writing was on the wall.

Trump ran on many messages, most of them confusing and contradictory, but one of his loudest and clearest messages was to end President Joe Biden’s “EV mandate.” It made no difference there never was a mandate, just a series of policies designed to encourage car companies to make more zero-emission vehicles and consumers to buy them — Trump was gunning for EVs.

Two bills were introduced in the Senate that, if enacted, would dramatically increase the price for most electric vehicles. The first bill, sponsored by Sen. John Barrasso (R-Wyo.), would eliminate the $7,500 EV tax credit, while a second one from Sen. Deb Fischer (R-Neb.) would impose a $1,000 tax on the purchase of any new EV.

None of this is exactly surprising, except perhaps the timing. After taking office, Donald Trump signed executive orders signaling his intent to eliminate the Biden administration’s electric vehicle policies, which he has falsely labeled a “mandate.” But an executive order was never going to be enough; it was going to take an act of Congress to get rid of it — and now several Republicans have stepped up to get the ball rolling.

Five electric vehicles from Hyundai, Kia, and Genesis now qualify for the US’s $7,500 EV tax credit, Electrek reports. The new models include popular vehicles like the Hyundai Ioniq 5 crossover SUV and Kia EV9 three-row family hauler. Now, 25 EVs and plug-in hybrids across 10 brands qualify for the credit.

The Biden Administration’s EV tax credit rules mandate building vehicles in North America for eligibility and include additional requirements for sourcing battery components. In 2022, Hyundai and Kia threatened to take legal action against Biden’s Inflation Reduction Act after it expanded the available credits but left the EVs they were building in Korea ineligible for them.

Carvana is now offering discounts of up to $4,000 at checkout for eligible used EVs and plug-in hybrids. The discount is essentially an advancement of the federal tax incentive for previously owned vehicles, but it lets customers reap the benefit immediately rather than waiting for tax refunds the following year.

You will still need to file your taxes correctly using IRS Form 8936, and you have to agree to transfer the credit to Carvana once you do file. So, while it’s not making tax season any easier, Carvana is offering a lower cost of entry to buy an electric vehicle, which could help push customers interested in EVs to take the leap. Carvana will help you, though, as representative Hayley Pollack tells The Verge in an email:

House Republicans advanced an effort to void the Biden administration’s EV tax credits, even as electric vehicle sales in the US continued to grow year over year.

The House Ways and Means Committee voted in favor of a bill that would undo the federal EV tax credits, arguing that the rules would result in US taxpayer dollars flowing to Chinese companies. The tax credits were “pushed by radical environmentalists and some EV producers” and should therefore be struck down, according to a House Republican fact sheet.

The Hyundai Ioniq 5 will reportedly be the first car rolling out of the company’s new Georgia factory this fall. Moreover, company CEO Jose Muñoz tells Automotive News he expects the US-made version will net buyers the full $7,500 federal EV tax credit, which the South Korea-made vehicle isn’t otherwise eligible for (outside of a leasing loophole).

Hyundai will start producing the Ioniq 5 at the Georgia plant in October, but the company won’t be making batteries there for “about a year,” Automotive News writes. For now, the article says the company will source its batteries from a Hungarian factory operated by Hyundai’s partner for its Georgia battery production, SK On.

The Biden administration is giving automakers a little leeway around some of the strict rules regarding eligibility for the government’s $7,500 tax credit.

The final guidance, which was released today, gives car companies a two-year exemption from provisions in the Inflation Reduction Act (IRA) intended to disqualify EVs with battery minerals from countries like China, Russia, Iran, and North Korea — so-called “foreign entities of concern” (FEOC).

Chevy lifted the stop-sale order on the Blazer EV that was put in place last December after numerous owners and reviewers reported significant issues with the vehicle’s software, including blank infotainment screens and error messages while charging.

Chevy rolled out a software update that it says should fix the problems as well as provide a few enhancements for Blazer EV owners. In addition, Chevy announced it was cutting the Blazer EV’s price by an average of $5,900 and that the vehicle will qualify for the full $7,500 federal EV tax credit when sales resume.

The list of electric vehicles that qualify for the full $7,500 federal tax credit in the US has shrunk — considerably.

Thanks to new requirements about battery minerals and sourcing that kicked in on January 1st, only five battery electric vehicles are eligible for the full credit as well as one plug-in hybrid vehicle. A few more qualify for the $3,750 half credit. And that’s about it.

Electric vehicles with batteries that contain minerals and materials sourced from China won’t be eligible for the $7,500 federal EV tax credit starting on January 1, 2024, according to guidelines recently released by the Internal Revenue Service.

That means a lot of EVs are about to lose their eligibility — chief among them, the Ford Mustang Mach-E. Ford sent out a notice to dealers recently stating that it is “unlikely that any Mustang Mach-Es will qualify for the Federal Tax Credit beginning on 1/1/24,” according to a report in Cars Direct.

A federal tax credit funded through the Inflation Reduction Act can currently shave up to $7,500 off the price of Tesla’s Model 3, but that’s about to drop in half. The tax credit will fall to $3,750 by January 1st, 2024 for the Model 3 Rear-Wheel Drive and Model 3 Long Range, the company warned.

Elon Musk’s company made the announcement via a banner on Tesla’s website, TechCrunch reports. Starting at around $36,000, the Model 3 comes with the lowest cost of any Tesla vehicle. Now, Tesla says the full tax credit will only be available to deliveries made through December.

The Treasury Department released new guidance Friday outlining how car dealers can give customers instant access to the electric vehicle rebate starting in January 2024. It’s the latest move by the Biden administration to bring down the cost of EVs in the hopes that more people will buy them.

The new guidance lays out how dealers can effectively reduce the price of an EV by as much as $7,500 at the point of purchase rather than the customer having to wait until they file their taxes to claim the credit.

The starting price of a Tesla Model 3 — after federal tax credits — may once again be below the fabled $35,000 mark. Tesla’s website now claims every new Model 3 is eligible for the full $7,500 federal tax credit in the United States, after those credits were previously cut in half on April 18th for the entry-level Standard Range and Long Range RWD models.

Here in California, a short distance from Tesla’s Fremont factory, I would pay $41,630 before tax — but only $32,130 after federal and state incentives, assuming Tesla is correct that its cars now qualify for the full federal credit. It could cost less under $30,000 depending on your state’s incentives.

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.