The new "Clean Vehicle Credit" program is only a fraction of the Inflation Reduction Act, but its changes to the federal incentives surrounding EV car purchases are sweeping and focus mainly on domesticating EV manufacturing and supply sourcing among the U.S. and its allies to separate production and minimize U.S. manufacturing's current reliance on foreign supplies. Some of the changes to the program will occur the moment the Act is signed by the President, but other aspects of the new proposal will take effect a few months, or even years down the road.

Federal EV Tax Credits: 2023 and Beyond

Some elements of the updated Clean Vehicle Credit program still need to be ironed out by the government. The previously mentioned battery component and sourcing requirements will need guidelines from government agencies on how to specifically measure the amount of critical minerals in the vehicle battery, which isn't expected to be figured out until the start of 2023. The amount of free-trade-sourced components required for a given vehicle to qualify for a purchase incentive increases over time. The percentage of the value of the applicable critical minerals must be 40 percent in 2023, 50 percent in 2024, 60 percent in 2025, 70 percent in 2026, and finishes at 80 percent beginning 2027 and onward. Hardly any current EVs would qualify for the tax credit under these restrictions.

2021 Ford Mustang Mach E4x GT Performance vs 2021 Tesla Model Y Dual Motor Performance 6

Immediate Changes

The previous cap of 200,000 vehicles per manufacturer that could qualify for the federal incentive (up to $7,500) has been removed, which means every automaker now has a clean slate with regard to its customers getting the incentive, a boon for companies like Tesla, Chevy, and Toyota, which had already hit their caps. The maximum credit amount remains the same, valued at $7,500 total. Half of that value is based on the amount of critical minerals contained in the powertrain battery of the vehicle, which need to be sourced from the U.S. or a country with a free trade agreement with the U.S. The other half of that value is awarded based on the value of the components of the battery assembled in North America.

The most immediate change to the program, and the one you should care about right now, is the final major requirement: Eligible vehicles need to be assembled in North America effective upon enactment. If your EV isn't assembled here, it won't qualifyat all. Based on the U.S. assembly requirement, the Cadillac Lyric, Chevy Bolt EV and EUV, Ford F-150 Lightning, Ford Mustang Mach-E, GMC Hummer EV, Lucid Air, Nissan Leaf, Rivian R1S and R1T, Tesla Model 3, Model X, and Model Y, and the Volkswagen ID.4 would be the only vehicles currently eligible for the federal rebate. The upcoming Chevy Silverado EV and Tesla Cybertruck pickups could also qualify under this rule.

However, there also are new pricing limits for the program that put a cap on the overall value of a vehicle; $55,000 for sedans or other cars and $80,000 for SUVs and trucks, so some trim levels of these vehicles will still not qualify. Additionally, there are new consumer income requirements; if you make too much money, you don't qualify for the program. Single tax filers are capped at an income of $150,000, an individual "head of household" is capped at $225,000, and married couples filing taxes together are capped at $300,000.