Comprehensive Guide to Clean Vehicle Credit Eligibility

Introduction

The Inflation Reduction Act (IRA) introduced significant changes to the Clean Vehicle Credit program, aimed at encouraging the adoption of electric vehicles (EVs), plug-in hybrids (PHEVs), and fuel-cell electric vehicles. These changes include new eligibility requirements for both new and used clean vehicles. In this guide, we’ll break down what EV shoppers need to know about the updated program.

When Does the New Program Start?

Most of the updated Clean Vehicle Credit program rules came into effect on January 1. However, the "made in North America" requirement became effective earlier, on August 16, the day President Biden signed the IRA into law. This early rollout of the assembly rule significantly reshaped the eligibility landscape for EV tax credits.

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How Many Clean Vehicles Are Made in North America?

The requirement that vehicles be assembled in North America has disqualified 75% of the previously eligible plug-in models. Prior to August 16, 65 models qualified for credits—29 EVs and 36 PHEVs. As of now, only 16 models meet the assembly requirement. Furthermore, this number may shrink further when additional restrictions, such as battery material sourcing rules and price caps, take effect.

Challenges with Tax Credit Availability

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Despite the availability of tax credits, many EV shoppers may find it challenging to benefit from them in the first few years of the program. The primary objective of the Clean Vehicle Credit plan is to incentivize automakers to establish or update manufacturing facilities in North America. However, this process requires significant time and resources, potentially delaying widespread availability of eligible vehicles.

Tax Credits for Used Clean Vehicles

For the first time, the Clean Vehicle Credit plan extends eligibility to used EVs, PHEVs, and fuel-cell vehicles. To qualify, the used vehicle must meet the following criteria:

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• Cost less than $25,000.
• Be at least two years older than the calendar year of purchase (e.g., a 2023 purchase requires a 2021 model or older).
• Buyer’s income must not exceed $75,000 for single filers or $150,000 for joint filers.

The credit for eligible used clean vehicles is 30% of the purchase price, up to a maximum of $4,000.

Price and Income Limits for New Clean Vehicles

The program also imposes income limits for buyers of new clean vehicles, based on their adjusted taxable income:

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• $150,000 for single filers.
• $300,000 for joint filers.
• $225,000 for heads of households.

Price caps for eligible vehicles are as follows:

• $55,000 for sedans.
• $80,000 for pickups, SUVs, and vans.

These limits exclude several high-profile North American-made models, including the GMC Hummer, Lucid Air, and certain trims of the Rivian R1T and Ford F-150 Lightning.

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