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The new rules are complicated. Here’s how to make sense of them if you’re shopping for an electric vehicle.
The Department of Treasury published new rules last year that will determine which new electric vehicles, purchased for personal use, will qualify for a $7,500 tax credit. They went into effect on April 18, 2023, and last for the next decade or so.
These new tax credit rules are complicated. The list of cars that qualify for the new tax credit can change from year to year — and even month to month. Many buyers in the EV market might have a few questions, including: Should I buy that new car now, or should I wait? Which cars qualify for the current tax credit, and which ones will earn the new one?
This is Heatmap’s guide to the new tax credit, why it matters, and what to keep in mind as you go EV shopping.
If you’re an ordinary American buying a brand-new EV to run errands and pick up the kids, these new rules apply to you. They will determine which cars you can get a federally funded discount on.
If you’re not buying a new car for personal use — because you’re getting it for your business, say, or because you’re buying a used EV — these new rules don’t apply to you. But you may qualify for other new subsidies. We get into those below.
And even if you are in that first category, you may discover it’s much cheaper to lease a new EV instead of buying it outright. We get into why below, too.
They completely change how the United States approaches the EV industry.
During the Bush and Obama administrations, the U.S. was focused mostly on getting automakers to begin to experiment with EVs. So it discounted the first 200,000 or so electric vehicles that each manufacturer sold by up to $7,500. If a company had cumulatively sold more than that number over time, as Tesla and General Motors eventually did, then the discount expired. By 2022, that had led to a peculiar situation where foreign automakers, such as Hyundai, could use the subsidy, while some of the largest American automakers couldn’t.
Now, U.S. policy is focused on two goals: (1) building up a domestic supply chain for EVs and (2) getting more EVs on the road. So the tax break is completely uncapped — any automaker can use it as many times as possible if they meet the criteria.
But many new requirements apply: Only cars that undergo final assembly in North America will qualify for any of the tax credit. Then, cars with a battery that was more than 50% made in North America will qualify for a $3,750 subsidy. And cars where at least 40% of the “critical minerals” used come from the U.S. or a country with whom we have a free-trade agreement will qualify for another $3,750 subsidy.
Those percentage-based requirements will ramp up over time. By 2029, for instance, 100% of a car’s battery and battery components must be made in North America.
Because Congress said so. The Inflation Reduction Act, which Democratic majorities in the House and Senate passed last year, mandated this change to the EV tax credit as part of its broad expansion of American climate policy.
Initially, fewer EVs will receive a subsidy under the new rules, Biden officials say. On a press call with reporters, a senior Treasury official argued that more cars will eventually qualify under the new rules than qualified under the old ones.
This year, at least 15 car or light trucks will receive some or all of the credit. Only some of those vehicles will qualify for the full $7,500 tax credit; some will qualify for a partial $3,750 tax credit. Here is the full list of qualifying models, along with the amount of the tax credit that they will earn:
• Audi Q5 TFSI e Quattro PHEV ($3,750)
• Cadillac LYRIQ ($7,500)
• Chevrolet Bolt ($7,500)
• Chevrolet Bolt EUV ($7,500)
• Chrysler Pacifica PHEV ($7,500)
• Ford Escape Plug-in Hybrid ($3,750)
• Ford F-150 Lightning, Standard & Extended Range ($7,500)
• Jeep Wrangler PHEV 4xe ($3,750)
• Jeep Grand Cherokee PHEV 4xe ($3,750)
• Lincoln Corsair Grand Touring ($3,750)
• Rivian R1S, Dual Large & Quad Large ($3,750)
• Rivian R1T, Dual Large, Dual Max, & Quad Large ($3,750)
• Tesla Model X Long Range ($7,500)
• Tesla Model 3 Performance ($7,500)
• Tesla Model 3 Long Range AWD ($3,500)
• Tesla Model Y AWD, Rear-Wheel Drive, & Performance ($7,500)
• Volkswagen ID.4 AWD PRO, PRO, S, & Standard ($7,500)
Some vehicles that earned the full tax credit in 2023, such as the Ford Mustang Mach E, don’t qualify for any benefit as of January 2, 2024.
Yes. A few examples: The Hummer EV, which costs more than $110,000 a piece, won’t qualify for either the new or old tax credit — it’s too expensive. And the Polestar 2 won’t qualify because it’s assembled in China.
Yes. Starting this year, the U.S. is preventing cars that receive too much manufacturing input from a “foreign entity of concern” — that is, China — from qualifying for anyof the tax credit. This has reduced the number of vehicles that qualify for the $7,500 bonus.
This year, the government will also allow buyers to refund their EV tax credit at the dealership. That means buyers can now get up to a $7,500 discount at the moment when they buy their car instead of waiting until they file their taxes in the following year.
Yes. A married couple must have an adjusted gross income of less than $300,000 a year, and a single filer must have an AGI of less than $150,000 a year, to qualify for any aspect of the subsidy. A head-of-household must have an income of less than $225,000 a year.
Yes. Under the proposed rule, cars must have an MSRP below $55,000 to qualify for the credit. Vans, pickup trucks, and SUVs must have an MSRP below $80,000.
Yes. The Inflation Reduction Act also included a new $7,500 tax credit for EVs used for any commercial purpose. The Treasury Department is expected to interpret that provision to cover leasing, but it hasn’t announced the guidelines for that rule yet, so we don’t know for sure.
But the provision will probably tilt new EV drivers toward leasing their car rather than buying it outright, because the dealer should — emphasis on should — offer relative discounts on leasing vehicles as compared to buying them.
Yes. There’s also a new $4,000 tax credit for buying a used EV that costs $25,000 or less. It went into effect on January 1, 2023, so you can go ahead and use it today.
But note that it has even stricter income limits: Married couples can only take advantage of it if they make $150,000 or less, and other filers if they make $75,000 or less.
Here’s the list of cars that qualified for the $7,500 tax credit before April 18, 2023, according to the Department of Energy.
• Audi Q5 TFSI e Quattro (PHEV)
• BMW 330e *
• BMW X5 xDrive45e**
• Cadillac Lyriq
• Chevrolet Bolt
• Chevrolet Bolt EUV
• Chevrolet Silverado EV
• Chrysler Pacifica PHEV
• Ford E-Transit
• Ford Escape Plug-In Hybrid *
• Ford F-150 Lightning
• Ford Mustang Mach-E
• Genesis Electrified GV70
• Jeep Grand Cherokee 4xe
• Jeep Wrangler 4xe
• Lincoln Aviator Grand Touring *
• Lincoln Corsair Grand Touring *
• Nissan Leaf
• Nissan Leaf (S, SL, SV, and Plus models)
• Rivian R1S
• Rivian R1T
• Tesla Model 3 Long Range
• Tesla Model 3 Performance
• Tesla Model 3 RWD
• Tesla Model Y All-Wheel Drive
• Tesla Model Y Long Range
• Tesla Model Y Performance
• Volkswagen ID.4
• Volkswagen ID.4 AWD, Pro, and S models
• Volvo S60 PHEV *
• Volvo S60 Extended Range
• Volvo S60 T8 Recharge (Extended Range)
* These cars don’t qualify for the full $7,500 subsidy, although they all receive at least a $5,400 tax credit.
** Only some BMW X5 xDrive45e vehicles qualify — it depends where the car was made. Check the VIN or ask the dealership to confirm it was made in North America before buying.
This story was originally published on March 31, 2023. It was last updated on March 5, 2024, at 10:00 a.m. ET.
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On the fallout from the LA fires, Trump’s tariffs, and Tesla’s sales slump
Current conditions: A record-breaking 4 feet of snow fell on the Japanese island of Hokkaido • Nearly 6.5 feet of rain has inundated northern Queensland in Australia since Saturday • Cold Arctic air will collide with warm air over central states today, creating dangerous thunderstorm conditions.
President Trump yesterday agreed to a month-long pause on across-the-board 25% tariffs on Canada and Mexico, but went ahead with an additional 10% tariff on Chinese imports. China retaliated with new levies on U.S. products including fuel – 15% for coal and liquefied natural gas, and 10% for crude oil – starting February 10. “Chinese firms are unlikely to sign new long-term contracts with proposed U.S. projects as long as trade tensions remain high,” notedBloomberg. “This is bad news for those American exporters that need to lock in buyers before securing necessary financing to begin construction.” Trump recently ended the Biden administration’s pause on LNG export permits. A December report from the Department of Energy found that China was likely to be the largest importer of U.S. LNG through 2050, and many entities in China had already signed contracts with U.S. export projects. Trump is expected to speak with Chinese President Xi Jinping this week.
Insurance firm State Farm is looking to hike insurance rates for homeowners in California by 22% after the devastating wildfires that tore through Los Angeles last month. The company, which is the largest insurer in California, sent a letter to the state’s insurance commissioner, asking for its immediate approval to increase home insurance by 22% for homeowners, 15% for tenants and renters, and 38% for “rental dwelling” in order to “help protect California’s fragile insurance market.” So far, the firm has received more than 8,700 claims and paid out more than $1 billion, but it expects to pay more. “Insurance will cost more for customers in California going forward because the risk is greater in California,” the company said yesterday. “Higher risks should pay more for insurance than lower risks.” A report out this week found that climate change is expected to shave $1.5 trillion off of U.S. home values by 2055 as insurance rates rise to account for the growing risk of extreme weather disasters.
A new report outlines pathways to decarbonizing the buildings sector, which produces about one-third of global emissions. The analysis, from the Energy Transitions Commission, proposes three main priorities that need to be tackled:
“This will require collaboration right across sector, between governments, industry bodies, and private companies,” said Stephen Hill, a sustainability and building performance expert at building design firm Arup. “We need to be ambitious, but if we get it right we can cut carbon, generate value for our economy, and improve people’s quality of life through action like improving living conditions and reducing fuel poverty.”
Energy Transitions Commission
Fracking executive Chris Wright was confirmed yesterday as the new Energy Secretary. Wright is the CEO of the oilfield services firm Liberty Energy (though he has said he plans to step down) and a major Republican donor. He has a history of climate denialism. “There is no climate crisis, and we’re not in the midst of an energy transition,” Wright said in a video posted to LinkedIn last year. Although during his confirmation hearings, he struck a different tone, avowing that climate change is happening and is caused by the combustion of hydrocarbons. He expressed enthusiasm for certain clean energy technologies, including next-generation geothermal and nuclear. Wright will be tasked with executing President Trump’s planned overhaul of U.S. energy policy, and expansion of domestic energy production. The Department of Energy has a $50 billion budget and is also in charge of maintaining the nation’s nuclear weapons stockpile.
A few new reports find Tesla is seeing sales drops in some key markets, possibly due to CEO Elon Musk’s push into politics. In California, Tesla registrations fell by about 12% last year, according to the California New Car Dealers Association, and the company’s EV market share in the state fell by 7.6%, while Kia, Hyundai, and Honda all made decent gains. “While high interest rates, tough competition, and the introduction of a restyled Model 3 sedan hurt the EV maker’s sales in California, the loss of business was likely exacerbated by Elon Musk’s involvement in the U.S. election,” Reutersreported. Tesla is also running into trouble across the pond, where Musk has been meddling in European politics, throwing his weight behind far-right parties. In the European Union, Tesla registrations fell 13% last year, but dropped 41% in Germany, the bloc’s biggest BEV market. Last month, Tesla registrations dropped by about 63% in France, 44% in Sweden, and 38% in Norway.
Researchers have developed a new variety of rice that has a higher crop yield than other varieties, but emits 70% less methane.
Artificial intelligence may extend coal’s useful life, but there’s no saving it.
Appearing by video connection to the global plutocrats assembled recently at Davos, Donald Trump interrupted a rambling answer to a question about liquefied natural gas to proclaim that he had come up with a solution to the energy demand of artificial intelligence (“I think it was largely my idea, because nobody thought this was possible”), which is to build power plants near data centers to power them. And a key part of the equation should be coal. “Nothing can destroy coal — not the weather, not a bomb — nothing,” he said. “But coal is very strong as a backup. It’s a great backup to have that facility, and it wouldn’t cost much more — more money. And we have more coal than anybody.”
There is some truth there — the United States does in fact have the largest coal reserves in the world — and AI may be offering something of a lifeline to the declining industry. But with Trump now talking about coal as a “backup,” it’s a reminder that he brings up the subject much less often than he used to. Even if coal will not be phased out as an electricity source quite as quickly as many had hoped or anticipated, Trump’s first-term promise to coal country will remain a broken one.
Yet in an unusual turn of events, the anticipated explosion of demand for electricity on its way over the next few years has led some utilities to scale back their existing plans to shutter coal-fired power plants, foreseeing that they’ll need every electron they can generate. Ironically, especially in Georgia, that need is driven by a boom in green manufacturing.
Nevertheless, coal’s decline is still remarkable. At the start of the 21st century, coal was the primary source of electricity generation in 32 states; now that number is down to 10 and dropping. As recently as 2007, coal accounted for half the country’s electricity; the figure is now 16%. Worldwide coal demand keeps increasing, mostly because of China and India. But here in the United States, the trajectory is only going in one direction.
Confronted with those facts, a politician could take one of two basic paths. The first is to make impossible promises to voters in coal country, telling them that the jobs that have disappeared will be brought back, their communities will be revitalized, and the dignity they feel they have lost will be returned.
That was the path Donald Trump took. He talked a lot about coal in 2016, making grand promises about the coal revival he would bring if elected. At a rally in West Virginia, he donned a hardhat, pretended to shovel some coal, and said, “For those miners, get ready, because you’re going to be working your asses off.” And in Trumpian style, if he couldn’t keep the promise, he’d just say he did. “The coal industry is back,” he said in 2018, a year which saw the second-most coal capacity retired in the country’s history to that point. “We’re putting our great coal miners back to work,” he said on the campaign trail in 2020, when the number of coal-producing mines in the U.S. declined by 18%.
When Trump took office in January 2017, there were just over 50,000 coal jobs left in the country after decades of decline. When he left office in 2021, the number was down to 38,000. The number is slightly higher today at around 43,000, but it’s still infinitesimal as a portion of the economy.
Trump’s failure to bring back coal jobs wasn’t because his affection for the fuel source was insincere. He certainly had as coal-friendly an administration as one could imagine; his second pick to run the Environmental Protection Agency was a coal lobbyist. But the triumvirate of forces that drove those job reductions — automation, emissions-limiting regulations, and competition from fracked natural gas — were irresistible.
The second path for a politician confronting the structural decline of coal is to take concrete steps to create new opportunities in coal country that offer people a better economic future. That was what the Biden administration tried to do. As part of its clean energy push, Biden put a particular focus on siting new projects in underserved communities, including in areas where coal still defines the culture even though the jobs are long gone. The administration also directed hundreds of millions of dollars in funding “to ensure former coal communities can take full advantage of the clean energy transition and continue their leading role in powering our nation,” in the words of then-Energy Secretary Jennifer Granholm. Or as the Treasury Department put it, the administration was working “to strengthen the economies of coal communities and other areas that have experienced underinvestment in past decades.” These were real commitments, backed up by real dollars.
Today, the new Trump administration is committed to freezing, reversing, and clawing back as much of Biden’s clean energy agenda as it can. Whether that includes these investments in coal country remains to be seen.
There’s good reason to believe it will, however, both because of the antipathy Trump and his team hold for anything that has Biden’s fingerprints on it, and because Trump understands the fundamental truth of his political relationship to coal country: Its support for him is unshakeable, no matter the policy outcome.
Take just one example: Harlan County, Kentucky, site of the extraordinary 1976 documentary Harlan County, USA, which chronicled a strike by miners demanding fair wages and working conditions. Coal is still being mined in Harlan County, but as of 2023, only 577 people there were employed in the industry, or about one in every 19 working-age people in the county. It remains overwhelmingly white and overwhelmingly poor — and the voters there love Trump. He got 84.9% of the vote in 2016, 85.4% in 2020, and 87.7% in 2024.
It might be fair to ask what people in Harlan County and across coal country have to show for their support for the president. The absolute best he can offer them is that while coal will continue to decline under his presidency, it might decline a bit slower than it otherwise would have. Even if escalating electricity demand offers an opportunity for the coal industry, there’s little reason to believe it will reverse coal’s decline in America. At most it could flatten the curve, allowing some coal plants to remain in operation a few years longer than planned.
A future where coal is at most a miniscule part of America’s energy mix with a tiny labor force producing it seems inevitable. Most people in coal country understand that, as much as they might like it to be otherwise. If only their favorite politician would admit it to them — and commit to offering them more than fables — they could start building something better.
Companies, states, cities, and other entities with Energy Department contracts that had community benefit plans embedded in them have been ordered to stop all work.
Amidst the chaos surrounding President Trump’s pause on infrastructure and climate spending, another federal funding freeze is going very much under the radar, undermining energy and resilience projects across the U.S. and its territories.
Days after Trump took office, acting Energy Secretary Ingrid Kolb reportedly told DOE in a memo to suspend any work “requiring, using, or enforcing Community Benefit Plans, and requiring, using, or enforcing Justice40 requirements, conditions, or principles” in any loan or loan guarantee, any grant, any cost-sharing agreement or any “contracts, contract awards, or any other source of financial assistance.” The memo stipulated this would apply to “existing” awards, grants, contracts and other financial assistance, according to E&E News’ Hannah Northey, who first reported the document’s existence.
Justice40 was Biden’s signature environmental justice initiative. Community benefit plans were often used by Biden’s DOE to strengthen the potential benefits that projects could have on surrounding local economies and were seen as a vehicle for environmental justice. When we say often, we mean it: some high profile examples of these plans include those used for the Holtec Palisades nuclear plant restart in Michigan and the agency’s battery materials processing and recycling awards.
After Kolb’s edict went out, companies, states, cities, and other entities with DOE contracts that had community benefit plans embedded in them were ordered to stop all work, according to multiple letters to contract recipients reviewed by Heatmap News. “Recipients and subrecipients must cease any activities, including contracted activities, and stop incurring costs associated with DEI and CBP activities effective as of the date of this letter,” one letter reads, adding: “Costs incurred after the date of this letter will not be reimbursed.”
One such letter was posted by the University of Michigan research department in an advisory notice. The department’s website summarizes the letter as “directing the suspension” of all work tied to “any source of DOE funding” if it in any way involved “diversity, equity, and inclusion (DEI) programs,” as well as Justice40 requirements and community benefits plans.
These letters state companies and other entities with community benefit plans in their contracts or otherwise involved in their funding awards would be contacted by DOE to make “modifications” to their contracts. They only cite President Trump’s executive orders that purportedly address Diversity, Equity and Inclusion practices; they do not cite a much-debated Office of Management and Budget memo freezing all infrastructure law and Inflation Reduction Act spending, which has been challenged in federal court. It is altogether unclear if any outcome of the OMB memo litigation is even relevant to this other freeze.
We reached out to the Energy Department about these letters for comment on how many entities may be impacted and why they targeted community benefit plans. We will update this story if we hear back.
A lot is still murky about this situation. It is unclear how many entities have been impacted and the totality of the impacts may be unknown for a while, because a lot of these entities supposed to get money may want to keep fighting privately to, well, still get their money. It’s also hazy if all entities that received these letters are continuing to do any construction or preparatory work or other labor connected to their funding not tied to the community benefit planning, or just halting the funded labor altogether.
The blast radius from this freeze is hard to parse, said Matthew Tejada, a former EPA staffer who most recently served as the agency’s deputy assistant administrator for environmental justice under the Biden administration. Tejada, who now works for the advocacy group NRDC and remains connected to advocates in the environmental justice space, said he was very much aware of this separate freeze when he was first reached by Heatmap. But “unless you’re able to really have a network of information bottom up from the recipients, it’s a bit of a black box we’re operating around because we’re not going to get transparency and information from the administration.“
“Part of their obvious strategy here is to create enough confusion as possible to make defending as difficult as possible. But I’m fairly certain the community and various others here -- local governments, tribes -- will have plenty to say about cutting through that chaos to make sure the will of Congress and the outcomes of these programs and projects are delivered upon.” He believes that any attempts to modify these contract awards “on the pretext of canceling the contract[s] will in all likelihood meet a legal challenge.”
But the ripple effects of this other freeze are starting to surface in local news accounts.
According to the Erie Times-News, the city of Erie, Pennsylvania currently cannot access funding for a city-wide audit for home energy efficiency. And a big road improvement project in the Mariana Islands – a U.S. territory – was nearly derailed by the freeze, according to the news outlet Mariana’s Variety, which reported project developers are just going to try and move forward without the remaining money provided under contract.
We’ll have to wait and see the breadth of the impacts here and whether this freeze will produce its own legal or regulatory rollercoaster. Hang on tight.