New Rules Shrink List of EVs Eligible for Federal Tax Credit

Only 13 models now qualify for the full $7,500 credit, but instant rebate at point of sale expected to boost affordability and sales of eligible vehicles.

New rules for the federal electric vehicle (EV) tax credit took effect on January 1, 2024, significantly reducing the number of EVs eligible for the full $7,500 credit. The changes are part of the Biden administration's efforts to incentivize domestic EV production and reduce reliance on foreign entities, particularly China, for battery components and critical minerals.
Under the new rules, only 13 models of EVs are now eligible for the full tax credit. These include certain models from Chevrolet, Tesla, Ford, Chrysler, Jeep, Lincoln, and Rivian. Many popular models, such as the Ford Mustang Mach-E and most versions of the Tesla Model 3, no longer qualify due to their use of internationally sourced components.
The tax credit is now available as an instant rebate at the point of sale for approved dealers, making it more accessible for buyers. Previously, buyers had to claim the credit on their tax returns. However, income and vehicle price restrictions still apply.
Many automakers are working to adjust their supply chains to comply with the new rules and regain eligibility for the tax credit. This includes efforts to build US battery factories and process materials like lithium domestically. However, these changes are expected to take several years.
Despite the reduced number of eligible vehicles, the changes to the tax credit are expected to make EVs more affordable for more people, particularly low and middle-income buyers. The instant rebate can significantly reduce the upfront cost of an EV, potentially boosting sales of eligible models.