Have you been waiting for the right time to buy your first electric car? Luckily for you, a new federal tax incentive for electric vehicle buyers in the U.S. went into effect the second we entered 2023. The Inflation Reduction Act introduced a tax credit of up to $7,500 for those who purchase an electric vehicle. However, the new terms have certain limitations—one is that vehicles must be manufactured within the United States. Additionally, the tax credit is only available to individuals with adjusted gross incomes of $150,000 or less, heads of households with $225,000 or less, and married couples filing jointly with $300,000 or less. Other requirements state that an electric vehicle must be manufactured in the U.S. by a qualified manufacturer, have a minimum battery size of 7 kWh, and have a gross vehicle weight rating below 14,000 pounds. Battery electric vans, SUVs, and trucks can qualify for the credit if they have an MSRP below $80,000. Other electric vehicles, mainly passenger cars, have an MSRP limit of $55,000. So if you’re planning to purchase your first electric car, keep reading to learn more about which models qualify for this incredible $7,500 federal tax credit.
At number eleven, you have the Chevrolet Bolt and the Chevrolet Bolt EUV. Both models are great options for anyone. Unfortunately, they are based on older technology and do not use General Motors’ new Altium electric battery technology. This may make buyers hesitant as GM is shifting towards using updated technology for all its electric cars. Additionally, the Bolt has previously been involved in several high-profile battery fires, which have been one of the main concerns. GM once lost its ability to offer federal tax credits as it exceeded the 200,000 car cap under the old rule. However, thanks to the new law, GM models will again qualify for the tax credit. The tax credit you may receive for purchasing an electric vehicle, such as the Chevy Bolt, may vary depending on the sourcing percentage of critical battery materials in the car. If a minimum percentage of essential materials are not sourced from the United States or a country with which the U.S. has a free trade agreement, you may receive less than the full $7,500 tax credit. The Bolt starts at $26,500, while the Bolt EUV can be had for as little as $27,800.
At number ten is the Ford F-150 Lightning. This fully-electric pickup truck was initially released at a highly affordable price of $41,669. However, that price has since increased to $55,974, including destination charges. Despite this increase, it’s still possible to purchase the F-150 Lightning for under $80,000, which is the new limit for trucks and utilities to qualify for a federal tax credit.
At number nine is the Ford Mustang Mach-E. The Ford Mach-E has been incredibly successful in competing with Tesla models. Ford has not lost its eligibility for the federal tax credit as it has not sold as many vehicles as GM, Tesla, and Toyota. The Mach-E comfortably fits within the $80,000 maximum price for a utility vehicle, making it eligible for the tax credit. The only potential issues with the car are that it is due for a redesign in 2026, which may cause some buyers to want to wait and compare it to the new electric Chevy Blazer before making a decision. The Ford Mustang Mach-E has a starting price of $45,995.
At number eight is the Nissan Leaf. The Nissan Leaf starts at $29,135 and is not a particularly exciting choice. However, Nissan has a good reputation for building electric cars, and the Leaf is expected to go out of production in 2025 or 2026, as Nissan is planning to introduce a new line of electric vehicles. But those years are far enough, so it should not be a concern for buyers who want to purchase the Leaf now. Nissan has retained its eligibility for the federal tax credit, and the Leaf will fit comfortably under the $55,000 maximum price for a sedan or coupe.
The number seven spot belongs to the Rivian R1S and Rivian R1T. These models have a unique, impressive design that will turn heads. They are fun to own and drive. However, they do come with a higher price tag. It can be challenging to keep the cost of these vehicles under $80,000. Rivian recently had a recall for almost all of its cars to tighten a bolt which is not a significant issue. The R1S starts at $78,000 while the R1T is cheaper at $73,000.
At number six are the Tesla Model 3 and Tesla Model Y. The Tesla Model 3 and Model Y are two of the most popular models in the electric car scene. However, you can’t purchase a Tesla Model 3 or Model Y with the highly talked about “Full Self-Driving” (FSD) option without exceeding the federal limits for a tax credit of $55,000 for a sedan and $80,000 for a utility vehicle. The Model 3 has a starting price of $43,990 while the Model Y starts at $52,990.
At number five, you have the Volkswagen ID.4 which starts at $38,995. This is one of those models you need to make sure was manufactured in the U.S. if you want that tax incentive. Volkswagen only started producing its cars in the country last October. Before that, Volkswagen vehicles came from its plant in Germany. So make sure that the Volkswagen ID.4 you’re buying was made in the U.S. to qualify for the tax credit.
The Cadillac Lyriq takes the fourth spot on this list. It has a starting price of $63,000 and is classified as a light utility vehicle by the EPA. This means it falls within the $80,000 maximum price for a vehicle to qualify for the federal tax credit. One of the exciting things about the Lyriq is that it is one of the first GM cars to use the new battery platform Ultium. While the electric Hummer also uses Ultium, it is not a mainstream vehicle, and its reservations have sold out. Also, it doesn’t fit the $80,000 maximum price limit. Ultium is going to be GM’s main focus for their electric cars, so it is worth getting excited about and waiting for.
At number three, you have the Chevrolet Blazer EV. The new electric sport crossover vehicle is set to compete directly with the Ford Mustang Mach-E. The latest model is said to have Camaro DNA, similar to how the Mach-E has Mustang DNA, which will create intense competition. Many buyers may want to wait and compare these two vehicles before making a decision. The Chevrolet Blazer EV will cost you $44,995 minimum.
At number two is the Chevrolet Silverado EV. Traditionally, truck buyers would stick to one brand for life, but with the introduction of electric vehicles, that may change. As the younger generation is less loyal to a specific make of car, there will be more people considering an electric Silverado instead of a gas engine F-150. People will wait until 2024 when Ram releases an electric pickup, creating even more intense competition between the brands. The Chevrolet Silverado EV could start at $42,000.
And finally, at number one, you have the Tesla Cybertruck. There is still uncertainty about when it will be released and what it will cost. Tesla stated that the Cybertruck would cost under $40,000 before the federal tax credit. Given the low price point, it’s still being determined if the Cybertruck will qualify for a federal tax credit, but this is unlikely to affect sales as the demand for the Cybertruck is driven by passion and pent-up demand.
You may have noticed that the list of electric vehicles that qualify for the federal tax credit is currently limited, but it is expected that more options will be added in the near future. The IRS has mentioned that some car manufacturers have made agreements to become “qualified manufacturers” but they have not yet submitted a list of specific models that are eligible for the credit.