Should you buy an EV? Although Battery Electric Vehicles, Plug-in Hybrids, and Hydrogen Fuel Cell vehicles may have higher price tags than their gas-powered counterparts, buyers who want to go electric can take advantage of dealer discounts and government incentives that can make the switch much more affordable. Cartelligent is here to help new EV purchasers navigate confusing federal EV tax credits and California EV incentives.
With that said, claiming the 2024 EV tax credit isn’t as straightforward as you might hope or expect. Only select vehicles qualify for federal incentives—and the rules are set to change again in the future. Our introductory guide can help you move forward with confidence.
2024 Changes to the EV Tax Credit
One difference between the 2024 EV tax credit compared to 2023 is that you’ll no longer claim the credit as a part of your tax return. In 2024 you can qualify to receive the EV tax credit upfront when you purchase a vehicle and all eligible buyers can receive the full tax break regardless of federal tax liability.
Along with final assembly in America, critical mineral and battery components must meet new requirements to be eligible for the tax credit. Between 2024-2025, 60% of battery components must undergo final assembly or manufacturing in North America to qualify for a $3,750 tax credit.
To qualify for an additional $3,750 credit, 50% of the critical minerals used for battery manufacturing must be processed or extracted by the United States or an entity participating in a free trade agreement with the United States. In 2025, the percentage of critical minerals used must be at least 60% to qualify for the credit.
If manufacturers meet both requirements, you can get a total of $7,500 back in credits according to the United States Treasury. The manufacturing requirements introduced in the Inflation Reduction Act will make it harder for some EV models to qualify for the full tax credit. To understand how much credit-specific models will qualify for, contact Cartelligent advisors to discuss your options.
Federal EV Tax Incentives: Which Vehicles Qualify?
So, which EVs qualify for the 2024 EV tax credit offered by the federal government? With up to $7,500 on the line, it’s important to be very clear about the rules impacting buyers and lessees.
To qualify, a vehicle must meet all these requirements to receive the full credit amount:
- Cost less than $80,000 (for Vans, SUVs, and Pickups) or less than $55,000 (for all other vehicles). Find a list of EV models here.
- Undergo final assembly in North America. To see if a vehicle was assembled in North America, you can enter its VIN here.
- Have a battery capacity exceeding 7 kilowatt hours (kWh). Most qualifying EVs have a battery capacity between 40kWh – 100kWh.
- Must have a gross vehicle weight rating (GVWR) of less than 14,000 pounds.
- Modified adjusted gross income has to be within a specific limit.
- Between 2024-2025, 60% of battery components must undergo final assembly or manufacturing in North America.
- 50% of the critical minerals used for battery manufacturing must be processed or extracted by the United States or an entity participating in a free trade agreement with the United States.
You can only claim these incentives if you purchase the vehicle in question. If you lease instead, the dealership technically continues to own the vehicle. They may pass these savings along to you by reducing the lease payments, but they’re under no obligation to do so. When leasing an EV, a qualified car advising service like Cartelligent negotiates with dealerships on your behalf to save you money. By cultivating decade-long relationships with California’s top EV dealers, Cartelligent’s team of new car-buying advisors has saved clients thousands of dollars when leasing or purchasing a new electric vehicle.
Leasing an EV May Benefit You More Than Purchasing
Most manufacturers will need more time to meet all of the upcoming changes to the EV tax credit. This means, if you buy a new clean vehicle in 2024, you may not be eligible for the entire rebate. But under the IRA, leased electric cars qualify for a commercial clean vehicle credit which is less stringent than the clean vehicle tax credit. By leasing, you also circumnavigate the EV tax credit make and model requirements widening your selection to include foreign EVs.
As a commercial vehicle, leased cars do not have to meet the same strict battery and mineral sourcing standards as those who purchase because the manufacturer technically still owns it. While manufacturers aren’t required to pass those commercial clean vehicle credits onto the purchaser, many choose to in the form of a rebate to the down payment.
Since the dealer receives the credit, not you, income limits and production restrictions outlined in the clean vehicle tax credit won’t impact your eligibility. Leasing can be a better deal for those looking to drive clean but exceed an individual income level of $150,000 or jointly of $300,000. Those who do not meet the 2024 EV tax credit eligibility requirements may save more money by leasing than buying. Use Cartelligent’s guide to buying or leasing if you are unsure whether leasing is for you.
Besides the EV tax credit, residents who install a qualifying EV charging station may be eligible to receive a 30% tax credit toward the equipment and installation cost. The maximum residents can receive for the federal EV charger tax credit is $1000. To claim this credit, applicants will need to use the IRS form 8911 with federal tax returns. Combined with the full $7,500 EV rebate, those who make the switch to electric could save up to $8,500 from federal incentives in 2024.
EV Incentives in California
Clean Cars 4 All
An up-to-date list of state-level and local EV incentives can be found at Driveclean.ca.gov. Here, we’ve highlighted the requirements for California’s most important state-level incentive for 2024, Clean Cars 4 All*:
- Must meet the income eligibility set by the California Air Resources Board. The income limits for 2024 are expected to be similar to 2023 guidelines, ranging from $32,805 – $58,320 for an individual. See if you qualify here.
- Must be a California resident living in participating California districts (South Coast, Bay Area, San Joaquin Valley, Sacramento, and San Diego).
- Own a vehicle registered in your name and in the state of California.
- Must be replacing a vehicle at least 18 years old.
Consumer Assistance Vehicle Retirement Program
Some Californians could qualify for the Consumer Assistance Vehicle Retirement Program. This is a California incentive to encourage drivers to retire operational gas vehicles that failed smog. For each vehicle retired, income-eligible applicants can receive up to $1,500 per retired vehicle. Those who don’t qualify for the $1,500 may be eligible for $1000 to retire their vehicle at a BAR-contracted dismantler.
Pre-Owned Electric Vehicle Rebate Program
Those who have PG&E as an energy provider could qualify for a rebate towards a pre-owned elective vehicle. Those who meet the income-eligibility requirements qualify for a maximum rebate of $4,000. All others who qualify for the rebate are eligible for a maximum rebate of $1,000.
North Bay Area – MCE EV Instant Rebate
Specific North Bay counties, Contra Costa, Marin, Napa, and Solano, are eligible for a $3,500 EV Instant Rebate of a qualified lease or purchase of a new EV or plug-in hybrid. To qualify for this rebate, the following criteria must be met:
- An MCE customer.
- Lease or purchase a qualifying EV or plug-in hybrid from a participating dealership.
- After the purchase or lease date, the EV must be kept for 24 consecutive months.
- Associated address must be the same between your PG&E account and the registered EV with the DMV.
- Enrolled in a program like CalWORKS/TANF, CAPI, Clean Cars 4 All, SSI, or one of the others listed here. If not enrolled in a program, the maximum household income can not exceed a specific amount outlined here.
If you qualify, the rebate will appear as a discount at the point of purchase or lease. For help understanding California and Bay Area EV incentives, join a webinar by Ride and Drive Clean. As a local nonprofit partnered with a variety of organizations such as local cities, sustainability offices, government agencies, and more, Ride and Drive Clean encourages the adoption of electric vehicles.
South Bay Area – Silicon Valley Power Pre-Owned EV Rebate
Customers of Silicon Valley Power enrolled in a Financial Rate Assistance Program may qualify for a rebate of $1,000 or $1,500 towards a pre-owned electric or plug-in hybrid vehicle. Bonus rebates might be made if you meet the income eligibility requirements and get a used vehicle with an MPGe of 117 or greater. The full list of requirements can be found here.
Southern California – Replace Your Ride Program
Some income-eligible Californians in the South Coast Air Quality Management District, all of Orange County along with urban portions of LA, Riverside, and San Bernadino counties, may qualify for a Replace Your Ride Program Voucher of up to $9,500. This voucher can be used to replace high-polluting 2007 or older vehicles with a new or used hybrid, plug-in hybrid, battery electric, fuel cell, or conventional gasoline-powered with 35+ MPG. Before purchasing or leasing a replacement vehicle, a participant must first be issued a Preliminary Purchase Authorization Letter by a Case Manager.
Residents in Southern California who are active customers of the Southern California Edison (SCE) may qualify for the SCE Pre-Owned EV Rebate. This program offers two options based on household income level. Income-qualified individuals are eligible for Rebate Plus, a kickback of up to $4000. Everyone else is eligible for $1000 if an application is submitted within 180 days of the purchase or lease of a pre-owned Battery Electic Vehicle (BEV) or Plug-In Hybrid Electic Vehicle (PHEV).
Choosing Between a Used EV or New EV
When deciding between a pre-owned or new EV car, it’s important to identify your needs and priorities. Here are the key areas you need to consider when EV car shopping:
- Budget: Used cars look more affordable upfront but may have higher interest rates on loans. New cars often secure better financing rates thanks to aggressive new car incentives. When you compare used car prices with new car purchase or lease prices, the overall cost can be roughly the same.
- Range: Older EVs can suffer from battery degradation or come with a lower EPA range, meaning you’ll have to charge your pre-owned car more often compared to a new EV.
- Reliability and Warranty: Most new cars come with a standard 3-year, or the first 36,000 miles, manufacturer warranty. Within the first 3-5 years of owning a new vehicle, you won’t have as many, if any, mechanical issues. Used cars, in comparison, may or may not come with an included warranty. You are also more likely to encounter mechanical issues within the first 3-5 years of owning a used car due to aging and wear and tear.
- Safety and Technology: New cars come equipped with the latest safety features and technology such as advanced safety systems, driver-assistance tools, and infotainment systems. Newer cars tend to be safer cars.
- Lifestyle: If you are planning on using your car for commuting, road trips, or shuttling kids to activities all weekend, a new car’s reliability, safety features, and greater mile range on a single charge may make you feel more at ease.
With over 20 years of car buying experience, we have found new cars provide many people the most peace of mind. EV technology is improving year after year, along with the various federal, state, and county incentives designed to ease the transition to clean cars. Take advantage of Cartelligent’s purchasing power and industry connections with dealerships all over California to negotiate spectacular deals for a new EV on your behalf. Even if you think a new car is outside of your budget, Cartelligent offers free advice to find the right car and deal for you. Answer 4 simple questions to save yourself hours of research, dealership visits, and time at the negotiating table.
Get Help Navigating 2024 EV Tax Credit
Maximizing your return from federal, state, and local EV incentives is no easy task, but we’re here to help! Cartelligent is a new car-buying and leasing service that can help you navigate the entire upgrade process and shed light on confusing EV tax credit requirements.
We’re just a few clicks or a phone call away, so start a conversation today!
*EV incentives are set to change again in March 2024. We will update this information as updates come out.