The U.S. government and climate advocates want more electric vehicles on the roads, and they want them yesterday. The problem is that it is not easy to convince the population to abandon its reliable gasoline-using cars and switch to hybrid or fully electric vehicles. There are many obstacles on the road to transition, but probably the two biggest ones are availability and affordability. To address availability, some state governments like California will ban the sale of new gasoline-powered cars by 2035. Other states, including New York, are following suit. For affordability, the government is trying out tax credits, which have been updated to the year 2025. Not all electric or plug-in hybrid vehicles (PHEVs) fall under the new criteria, and there are limits based on the manufacturer’s recommended price and other material qualifications. How is an electric vehicle eligible for a tax credit? When President Biden passed his Inflation Reduction Act (IRA), he included some changes regarding how an EV qualifies for the federal tax credit (when purchased; there are different credits for new vehicle leases, and it works differently).
Here’s what an EV owes to qualify for the federal tax credit in 2025:
Have a battery capacity of at least 7 kilowatt-hours.
Have a gross vehicle weight (GVWR) of less than 14,000 pounds.
Be made by a qualified manufacturer.
Final assembly in North America.
Meets critical requirements for mineral components and batteries.
If the EV is a van, truck, or SUV, its manufacturer’s MSRP can’t exceed $80,000.
Electric vehicles other than cars must have a recommended price below $55,000.
These last three requirements are among the main reasons why this list looks different now than it did at the beginning of 2023.