You can still buy an EV or PHEV in 2022 and claim the tax credit – only if it’s US-made

The renewal of the electric vehicle tax credit that was launched Tuesday when President Biden signed into law the Inflation Control Act, significantly and immediately slashed the number of eligible hybrid models and electric vehicles.

It also leaves plenty of room for interpretation as to whether buyers for the rest of 2022 can claim it at all. But with some initial guidance issued late Tuesday by the Department of Energy and Internal Revenue, those aiming to claim the clean car credit, as it’s now called, have some early safeguards for two things:

The ceiling of 200,000 cars was not raised until 2023. So Tesla and GM cars are not eligible again until the 2023 tax year – on purchases made from January 2023 onwards. For example, a Tesla Model 3 purchased today is not eligible for credit.

Assembly in North America is mandatory. The final assembly location must be in North America – in this case the United States, Canada or Mexico – to claim it on vehicles purchased on or after August 16, 2022.

2022 Ford Mustang Mach E

So the Ford Mustang Mach-E, for example, remains eligible for the $7,500 credit, as Ford hasn’t yet reached the 200,000-vehicle cap and is made in Mexico.

Thanks to Transition Rule language written into the rule, those who signed a binding purchase contract for an eligible electric vehicle before August 16 will still be able to claim the credit.

This means that some buyers of vehicles that qualify as US-made but fail to meet the new credit rate caps — such as those from Rivian and Lucid — are likely to purchase a tax credit-eligible vehicle through January 1, 2023.

2022 Lucid Air Grand Touring Performance2022 Lucid Air Grand Touring Performance

The final assembly requirement leaves a very short list of eligible electric vehicles. And with upcoming rules on critical minerals, battery sources, and local content thresholds applied.

Since Mexico and Canada are no match for industry in the US for many shoppers, we’ve indicated their current country of origin. Starting with a list of North American assembled vehicles from the Department of Energy and a liquidation of vehicles from General Motors and Tesla, here are some models for which you may be able to claim credit (with credits carried over specifically from this pre-renewal list):

Audi Q5 Hybrid (Mexico)
BMW 330e (Mexico)
BMW X5 xDrive45e (Mexico)
Chrysler Pacifica Hybrid (Canada)
Ford Escape Plug-In Hybrid (US)
Ford F-150 Lightning (US)
Ford Mustang Mach E (Mexico)
Ford E Transit (US)
Jeep Grand Cherokee 4xe (US)
Jeep Wrangler 4xe (USA)
Lincoln Aviator Grand Touring (USA)
Lincoln Corsair Grand Touring (USA)
Lucid Air (USA)
Nissan Leaf (USA)
Rivian R1S (US)
Rivian R1T (US)
Recharge Volvo S60 (US)

2023 Mercedes-Benz EQS SUV2023 Mercedes-Benz EQS SUV

The tax credit may also apply to a few deliveries of the Mercedes-Benz EQS SUV, which are due to be in US production (and deliveries) before the end of the year — before the price cap takes effect in 2023.

There will certainly be some exceptions to the eligibility list, and the IRS notes: “Because some models are built in multiple locations, there may be vehicles on the DOE list that do not meet final assembly requirements under all conditions.”

Some of these anomalies that you may find at the dealership are likely caused by problems in the supply chain. For example, the federal government lists the BMW 330e as a final assembly in North America, while the example we drove last spring (by VIN and window sticker) was confirmed to have been built in Germany.

Everything in VIN

To double-check, we recommend looking specifically at the VIN (the vehicle-specific identifier, located at the base of the windshield) of the vehicle you’re buying – and using NHTSA’s VIN decoder to verify the collection point. There are other ways to read a VIN, but they are complicated.

VIN tag for a 1995 Chevrolet Caprice, by Flickr user Ingue86VIN tag for a 1995 Chevrolet Caprice, by Flickr user Ingue86

It’s also buyer beware, and is somewhat subject to change, and the federal government confirms that. The IRS noted: “The Internal Revenue Service and the Treasury Department will release information and solicit feedback from the public on various current and new tax credit incentives in the coming weeks and months.”

However, the additional news of the past day brings some peace of mind. If you choose a vehicle that you can document final assembly assembled in the US, a model that’s pre-cut, and a model from a manufacturer that hasn’t yet reached its 200,000-vehicle cap, it looks like you’ll be able to take advantage of this important benefit of the 2022 tax year after all.

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