The federal EV tax credit, initially heralded as a boost for electric vehicle adoption, has become caught up in slow sales, politics, and shifting regulations. As we close out 2023 and look towards 2024, here’s what you need to know.

New Year, New Rules

Starting January 1st, 2024, stricter requirements for battery and critical mineral components within vehicles will dramatically reduce the pool of models eligible for the full $7,500 tax credit. This means, some vehicles that currently qualify for the full credit may only be eligible for a partial credit or none at all in the new year.

In other words, the makeup of the battery, its North American content, and manufacturing location will impact who gets the full $7,500 credit. For example, batteries manufactured with Chinese minerals in the US might only get half the credit or $3,750.

Goodbye, Chinese Batteries

Popular models like the Tesla Model 3 versions equipped with Chinese-made batteries will lose their eligibility for the tax credit in 2024. Tesla has acknowledged this, stating that certain Model 3 configurations will cease receiving the credit after December 31st, 2023.

Tesla’s Uncertain Future

While some Tesla configurations like the Model X, Model 3 Performance, and Model Y might remain eligible for a tax break after December 31st, 2023, the picture isn’t entirely clear. For buyers, its crucial to research specific models before assuming eligibility.

Ford’s Evolving Landscape

Ford is constantly searching for a way to cut costs, and that means sourcing batteries and minerals from around the world. As a result, the popular Ford Mustang Mach-E, currently eligible for a partial $3,750 credit in 2023, might lose its tax credit advantage come 2024. The fate of the Ford F-150 Lightning electric pickup truck also remains unknown for the new year.

General Motors Holds Steady

Fortunately, most General Motors’ EVs currently enjoy the full $7,500 credit in 2023 and seem set to retain eligibility in 2024. Cadillac’s Lyriq and Chrysler’s Pacifica PHEV are also expected to join the ranks of credit-eligible vehicles in the new year.

Point-of-Sale Option

Finally, a glimmer of good news. Starting January 1st, 2024, eligible consumers can opt to claim the federal EV tax credit directly at the car dealership as a discount on the purchase price. This means you can enjoy the tax break upfront instead of waiting for tax season.

However, MSRP price caps and income limits still apply to the tax credit. Electric cars must be priced below $55,000, while electric SUVs cannot exceed $80,000. Additionally, your modified adjusted gross income (AGI) must fall within specific ranges to qualify: $150,000 (single), $225,000 (head of household), or $300,000 (married filing jointly).

With the landscape shifting rapidly, it’s crucial to stay informed and do your research before making any purchasing decisions. You can find updates and details about qualifying vehicles and credit rules here.