Federal tax credits end abruptly for most electric and plug-in hybrid vehicles

All electric and air vehicles sold after August 16 are subject to a new tax credit scheme with assembly requirements in North America. GT

Most electric cars that were expected to be eligible for a federal tax credit through the end of the year were abruptly cut off this week. Only 16 of 65 hybrid and all-electric vehicles sold in the United States remain eligible for a federal tax credit incentive between now and December 31.

Almost all imported brand hybrids immediately lost eligibility for the federal clean car tax credit incentives when President Biden signed the inflation-cutting act on Tuesday, according to the IRS.

It’s a ruling that could significantly slow the sales momentum electrified cars have had over the past year because it strips buyers of credit that could put up to $7,500 back into their pockets at tax time.

The ruling clarifies the language in a revised tax credit plan set to go into effect Jan. 1, immediately ending tax credit eligibility for all electric vehicles and imported brand vehicles. The only exceptions are cars made in North America, which include:

With the exception of the plug-in hybrid Audi, which was made in Mexico, they are all assembled at plants in the US

Although legislation usually takes effect on January 1 of the year after it is passed, bills are considered effective on the date the president signs them—August 16, 2022 for the Inflation Reduction Act.

That means all EVs and PHEVs sold after August 16 are subject to the new plan’s North American assembly requirements, according to the IRS.

CHECK VIN

Because some models are assembled at multiple locations — the Leaf, for example, is built in Japan as well as in Tennessee — consumers seeking a tax credit to help make an EV or PHEV affordable must check their vehicle identification number, or VIN , to determine where it was made.

The IRS-approved VIN Decoder is maintained by the US Department of Transportation so that consumers can easily perform checks on the dealer’s lot. Once the vehicle’s VIN is entered, the decoder will display a page of information including, on the last line, the name and location of the factory where the vehicle was built.

Only electric and hybrid cars that were built in plants in the United States, Mexico or Canada are now eligible for the federal tax credit incentive.

Domestic servants still eligible in 2022

Both GM and Tesla lost eligibility for tax credits for their vehicles more than a year ago after hitting the sales threshold that was part of the current plan. Among the remaining domestic brands, the list of IRS forms still approved for tax credit eligibility includes North American bulk versions:

President Biden signed the Inflation Reduction Act on Tuesday, which launched changes to the electric vehicle tax credit program. Demetrius Freeman/The Washington Post/Getty Images

More restrictions, but some comfort

On the first day of 2023, a number of other restrictions will apply that could disqualify tax credits from more models, including some electric vehicles and electric-motorized immigration in North America. The new rules will include country of origin requirements for metallic batteries and other components as well as buyer income limits and a maximum price of $55,000 for sedans and $80,000 for trucks, vans and SUVs.

At that point, the new rules would also eliminate the sales cap that costs eligibility for GM and Tesla and begin phasing out Toyota’s eligibility in October if the IRS ruling is not ended now.

However, Toyota’s electrified vehicles will remain ineligible unless the automaker moves some of its electric EV, PHEV, and fuel cell production to factories it already owns in the United States and Mexico.

Here is the full list of electric vehicles that are expected to remain eligible for credits in 2023:

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