Clean Vehicle Tax Credits: The New 2023 Rules in a Nutshell

The new 2023 rules for EV tax credits under the Inflation Reduction Act came into effect on April 18th, 2023 — reducing the number of car models that qualify for the full $7,500 federal tax credit. Here's exactly what changed, why it matters, and how to make sure your new clean vehicle qualifies.

The Two New Requirements

Any vehicle delivered on or after April 18th, 2023 must meet two separate requirements to qualify for the full $7,500. Meeting only one earns half the credit ($3,750). Meeting neither means no credit at all.

Critical Mineral Requirement: At least 40% of the critical minerals in the EV battery — including nickel, manganese, and cobalt — must be sourced from the US, a free trade agreement country, or recycled in North America. This percentage increases by 10% annually, reaching 80% in 2027.

Battery Component Requirement: At least 50% of the battery components must be manufactured or assembled in North America. This percentage also rises by 10% per year, reaching 100% by 2029.

Why This Reduces Eligible Models — For Now

Since most EV batteries are currently manufactured in Asia, the introduction of these domestic sourcing requirements has immediately narrowed the list of qualifying vehicles. That's frustrating for anyone shopping for a new EV today. But the long-term intent is sound: by incentivizing domestic battery production and building supply chains with allied nations, the government is pushing automakers to reduce US dependence on Chinese battery manufacturing while creating American jobs in the process.

Treasury Secretary Janet Yellen framed the step as helping consumers save on their purchases while simultaneously creating American manufacturing jobs and strengthening energy and national security. The short-term inconvenience is the cost of building a more resilient domestic supply chain.

How to Check Before You Buy

Before purchasing a new EV, always verify current eligibility on the official government website at fueleconomy.gov. The list changes as manufacturers update their supply chains, so a model that didn't qualify last month may qualify today — and vice versa. The IRS also maintains updated guidance at irs.gov.

Coming in 2024: Starting January 1, 2024, buyers will be able to apply the tax credit as a direct discount at the point of sale — no more waiting until tax filing time to receive the benefit. This is a significant change that will make the incentive far more accessible, especially for buyers who don't have a large tax liability.