Following the release of more detailed guidelines, there are eight fully-electric vehicles that still qualify for the full $7,500 clean vehicle tax credit — and many more that qualify under a unique loophole.
Purchasing a Tesla
As far as Tesla, this comes down to the Tesla Model 3 as well as the Tesla Model Y.
However, Model 3 Performance is the only configuration of Tesla’s sedan that qualifies for the full $7,500 tax credit.
The base Model 3 Rear-Wheel Drive as well as the newly-relaunched Model 3 Long Range All-Wheel Drive qualify for a partial tax credit of $3,750 due to battery material sourcing and/or battery production lines that are currently based in China.
All configurations of Model Y do qualify for the full $7,500 tax credit, including the base $47,240 Model Y All-Wheel Drive configuration. The IRS adjusted its SUV classification earlier this year so that Model Y falls under an $80,000 MSRP limit.
Purchasing an Electric Vehicle
The remaining qualifying makes and models all come from American automakers:
- Cadillac LYRIQ
- Chevy Bolt
- Chevy Blazer *EV coming in fall
- Chevy Equinox *EV coming in fall
- Chevy Silverado
- Chrysler Pacifica *plug-in hybrid
- Ford F-150 Lightning
- Lincoln Aviator Grand Touring *plug-in hybrid
There are additional vehicles that qualify for a partial tax credit of $3,750:
- Ford Escape *plug-in hybrid
- Ford E-Transit
- Ford Mustang Mach-E
- Jeep Grand Cherokee *plug-in hybrid
- Jeep Wrangler *plug-in hybrid
- Lincoln Corsair Grand Touring *plug-in hybrid
The tax credit is essentially cut-in-half on these vehicles due to battery sourcing that doesn’t meet stringent guidelines, or production that occurs in a non-approved foreign country.
All vehicles have to meet respective MSRP limits of $55,000 and $80,000 for sedans and SUVs, and buyers have to continue to meet income guidelines.
Eligible buyers will continue to realize the $3,750-$7,500 credit at tax time next year. A point-of-sale program should be setup in 2024.
Note that this is only applicable on a purchase of a new corresponding vehicle.
Leasing an Electric Vehicle
There is a corporate loophole that qualifies virtually every electric vehicle for the full $7,500 tax credit on a lease.
Whether an automaker chooses to pass on all or some of the $7,500 tax credit via a rebate or enhanced residual on a lease is entirely up to the leasing programs that are setup with the respective financing company.
Battery sourcing and production are also not taken into account when determining tax credit eligibility on a lease.
Vehicles that receive the full $7,500 tax credit on a lease include:
- Audi Q4 e-tron
- Audi Q5 55 TSFI e
- Audi e-tron
- Audi e-tron GT
- BMW i4 eDrive35
- BMW iX xDrive50
- Chrysler Pacifica Hybrid *plug-in hybrid
- Jeep Grand Cherokee 4xe *plug-in hybrid
- Jeep Wrangler 4xe *plug-in hybrid
- Hyundai IONIQ 5
- Hyundai Kona Electric
- Jaguar I-PACE
- Lucid Air
- Mercedes-Benz EQB
- Mercedes-Benz EQE Sedan
- Mercedes-Benz EQE SUV
- Mercedes-Benz EQS Sedan
- Mercedes-Benz EQS SUV
- Polestar 2
- Porsche Cayenne E-Hybrid *plug-in hybrid
- Porsche Taycan
- Volkswagen ID.4
- Volvo C40 Recharge
- Volvo XC40 Recharge
- Volvo XC60 Recharge *plug-in hybrid
- Volvo XC90 Recharge *plug-in hybrid
Rivian doesn’t currently offer leasing.
Tesla has utilized the tax credit on Model 3 Rear-Wheel Drive specifically to lower its residual and thus monthly payment; however, lease pricing is significantly higher today than it was just two months ago.
What’s Next?
We expect automakers to shift production lines and battery sourcing, with many more makes and models fully qualifying over the next three years.
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