Buying A Tesla, Rivian Or Ford EV? Find Out If They Qualify For Federal Tax Credits

Starting this year, many electric vehicles were eligible for a tax credit of up to $7,500, but the new guidance issued by the Treasury on the Inflation Reduction Act means several models on the list may no longer qualify.

Prior to the new guidance, around 40 models from 21 different makers, including Tesla Inc TSLA, Ford Motor Co F, Rivian Automotive Inc RIVN and General Motors Co GM, were eligible for the tax credit.

What’s New? Under the new guidelines, the credit amount will depend on whether the vehicle meets the critical mineral and/or battery component requirements. If a vehicle meets both requirements, it may qualify for the full $7,500 credit, while a vehicle that meets either requirement alone would be eligible for a $3,500 credit. Vehicles that do not meet either requirement will not be eligible for the credit, even if purchased before April 18.

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The requirements apply to vehicles assembled in North America that exceed a Manufacturers Suggested Retail Price of $80,000 for a van, pickup truck, or SUV, or $55,000 for any other vehicle. 

Critical Minerals Check: Under the critical mineral requirement, a predetermined percentage of the value of the critical minerals contained in the battery must be extracted or processed in the U.S. or in countries with which the U.S. has a free trade agreement. The percentage increases each year, reaching 80% by 2027.

Similarly, with battery components, a predetermined percentage of the value of the battery components must be manufactured or assembled in North America. For this year, EVs with 50% battery components manufactured in North America will be eligible for the tax credit. The percentage will increase each year until it reaches 100% in 2029.

Beginning in 2024, vehicles seeking the tax credit must not contain any critical minerals extracted, processed, or recycled by a “foreign entity of concern”. The Treasury will issue further guidance on this provision at a later date.

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