Prospective car buyers might want to do some extra homework because on January 1, 2023, the criteria for which electric vehicles are eligible for federal tax credits is changing.
The IRS on Thursday outlined two main qualifications: Car must have undergone final assembly in North America and not exceed a manufacturer suggested retail price (MSRP) of $80,000 for vans, sport utility vehicles, and pickup trucks, and $55,000 for other vehicles. Buyers will be able to access tax credits for new vehicles up to $7,500 and $4,000 for used vehicles.
The changes were included in the sweeping Inflation Reduction Act, which was also pitched as a major climate and energy bill.
While the Biden administration said the list is still a work-in-progress, it currently includes models from Tesla, Rivian, Kia, Stellantis, and Mercedes-Benz, among others.
The rule-change is designed to meet two somewhat conflicting goals: expand EV adoption in the United States while also favoring the domestic market over Chinese automakers.
To meet the first goal, the rule removes the 200,000-vehicle cap per manufacturer. Now the credit is available indefinitely for all manufacturers, even those that are well-established in the market.
As for the second, cars must be assembled in North America, and source raw minerals such as lithium and cobalt from countries that are in free trade agreements with the U.S. This rule aligns with another Biden administration policy going into effect in March that will force carmakers to buy raw materials from U.S. suppliers and trade allies.
At the moment, very few automakers meet that requirement.