Introduction
The open question that rings in the mind of many RAV4 Prime owners is, “Does the RAV4 Prime qualify for a Federal tax credit?” This question is naturally very curiosity instigating as the US federal did claim the tax credit to provide substantial financial relief a while ago. But, is it also true in the year 2024?
Short answer: No, the tax credit can not be availed by the RAV4 Prime owners because the final assembling process does not occur in North America.Â
In this article, I will discuss in detail why the RAV4 prime tax credit is no longer available and what changes have been made to it.
Note: The information provided in this article applies to the RAV4 Prime only and not the Hybrids.
RAV4 on the go!
Picture credit: Green Energy Consumers Alliance
What does the Federal Tax Credit mean?
The federal tax credit for electric vehicles (EV) first came into place in 2010. This tax incentive of $7,500 was put to encourage the use of electric cars in an attempt to reduce gas emissions and promote environmental-friendliness. In this tax credit, the federal US gave tax incentives against people’s tax liability if they purchased a qualifying EV. For the new EV owners, this meant a huge financial reduction in their taxes and a decent reward for their envoirnmentally-friendly choice. However, this also meant that the EV owners would not be provided with a tax refund.
The story of the EV tax credit has an interesting plot when 200,000 automobiles were sold by any EV-producing car company, the tax credit would no longer be available. And Toyota, like Tesla and General Motors, has hit this benchmark. The company sold its last eligible RAV4 Prime in June 2022.Â
The New Legislation
A new legislation, called the Inflation Reduction Act, was passed by President Joe Biden in August of 2022. This new rule removed the 200,000 limit on tax credit eligibility. But at the same time, it entailed a more restrictive approach towards EV tax credit.
The legislation says that you can qualify for a “New Clean Vehicle Tax Credit” if your new plug-in EV (or fuel cell vehicle, FCV) meets these 5 certain criteria:
- Vehicle type: Your vehicle should be an EV, plug-in hybrid EV, or fuel cell vehicle.
- Vehicle Manufacturer’s Suggested Retail Price (MSRP): The MSRP of an SUV, pickup truck, or van must be less than $80,000. But the MSRP for all other passenger vehicles should be less than $55,000 or less.Â
- Vehicle final assembly location:Â The final assembly needs to occur in North America.Â
- Critical mineral and battery requirements: Vehicles that have been placed in service on or after April 18, 2023, must meet the critical minerals requirement and the equally critical battery requirement. Each of these is $3,750.Â
- Time of sale report or seller report:Â The dealer hands the buyer a “time of sale report”. This report will have all the essential details like dealer’s name, address, VIN, and make of the vehicle. It will also include the model, placed in service date, and also the maximum credit.
You need to meet ALL of the mentioned criteria to qualify for either the full or partial tax credit. This depends on the EV’s battery and critical mineral requirements. Plus, the eligible cars must weigh less than 14,000 pounds and have a 7 kilowatt hours battery at a minimum. These vehicles should be placed into service no earlier than January 1, 2023. Moreover, you must intend to keep it for personal use mostly within the US. Lastly, you must not resell it. 🙂
But notice that according to the criteria, any EV that has its final assembling outside of North America is not eligible for the federal tax credit. This means the credit is only available on those EVs that have their final assembling in North America. And Toyota, completing its assembling process in Japan, does not meet the new eligibility criteria. Ouch! Don’t believe me try for yourself by entering the RAV4 Prime’s information here.
The beauty of the 2024 Toyota RAV4 Prime
Picture credit: Motor Trend
Alternative Possibilities: Local Rebates
So, if the federal tax credit is not available, what can you do as a wanna-be EV owner? There is still a chance of getting financial relief and that is through “local rebates”.
Many states of the US give incentives through local electric companies. You may research out which EV qualifies within your state.
Sources
The information provided in this article has been directly taken from the official New Clean Vehicle Tax Credit Checklist. The website to check the eligibility of EVs has also been taken from the officially used, fueleconomy.gov.Â
Conclusion
As of today, the federal tax credit is not available, and it may be a long time till becomes available. And I will keep updating you if and when it does. Till now you may still want to purchase your RAV4 Prime as it is a great deal considering all its features.
FAQs
Q1: How does the $7500 tax credit work?
The tax credit is used to avail your federal tax liability by up to $7500. But as of now, it is not unavailable.
Q2: What is the difference between a PHEV and an EV?
A plug-in hybrid electric vehicle (PHEV) has an electric motor. It also has a conventional gasoline or diesel engine. An EV, or electric vehicle, on the other hand, runs solely on electricity.
Q3: What is the income limit for the EV tax credit?
The taxpayer’s current or prior year’s modified adjusted gross income limit is $300,000 or less for joint filers and surviving spouses. For head of household filers and other filers, it is less than or equal to $225,000 or $150,000 respectively.
Q4: Do Toyotas get an EV tax credit?
No, Toyota’s plug-in hybrid (PHEV) and electric vehicles (EV) don’t qualify for the EV tax credit. This is also true for other EV-producing companies.Â
Q5: Is buying a RAV4 Prime worth it?
Yes, the RAV4 Prime offers excellent fuel efficiency and a comfortable ride. It also has advanced tech features.Â
Q6: What qualifies for a $7500 EV tax credit?
To qualify for the maximum $7500 EV tax credit, a vehicle must meet 5 criteria. This includes the end it’s assembling in North America which as of now, no automobile car does. Therefore, no car qualifies for the Federal Prime tax credit.