Buying an EV Before the End of 2023? Start Here

Introduction

The Clean Vehicle Credit program has brought significant changes to how electric vehicles (EVs) are incentivized in the U.S.

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This guide outlines key details about the program, focusing on eligibility, tax credits, and updates that affect EV buyers today and in the near future. Whether you're considering an EV purchase or want to understand the benefits, this comprehensive guide will help you navigate the changes effectively.

How Am I Affected Before Jan. 1?

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The scope of EVs eligible for tax credits has narrowed drastically due to new rules requiring vehicles to be assembled in North America. This rule became effective immediately upon the President’s signing of the bill on August 16, 2022, rather than waiting until January 1, 2023. Shoppers must now ensure their chosen EV meets this assembly requirement to qualify for tax incentives.

Are New Clean Cars and Trucks Costlier?

Automakers are exploring ways to offset the impact of losing tax credit eligibility for many vehicles.

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Some may lower prices or offer additional incentives to maintain sales momentum. However, most manufacturers already face financial losses on EV sales, which could limit their ability to reduce prices significantly. The net effect on vehicle costs remains uncertain.

How Can I Find Out Where a Vehicle Was Made?

The IRS has published a list of EVs and plug-in hybrid electric vehicles (PHEVs) that meet the North American assembly requirement. As of now, only 16 models from the original list of 65 remain eligible.

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To verify eligibility, consumers should use the Transportation Department’s VIN Decoder tool. This allows you to confirm the assembly location using the vehicle identification number (VIN) found on the window sticker or visible through the windshield.

What Is the Tax Credit for a Clean Vehicle Assembled in North America?

The maximum tax credit for eligible vehicles is $7,500. This includes plug-in hybrids (PHEVs) and fuel-cell electric vehicles (FCEVs), which were previously excluded. Starting January 1, 2023, the credit is split into two $3,750 components, with specific criteria for each portion.

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How Does the Tax Credit Split Work?

The tax credit is divided as follows:

• First $3,750: Requires a portion of battery minerals to be mined or processed in the U.S. or a country with a free trade agreement, or sourced from recycled batteries in North America.
• Second $3,750: Requires at least 40% of the value of battery-critical minerals to come from approved nations. This percentage will increase annually, reaching 80% by 2028.

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The requirements for each portion are independent, allowing vehicles to qualify for part of the credit without meeting all conditions.

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