The IRS recently released updated guidance on the tax break tied to American-made vehicles. This guidance affects which electric and qualifying vehicles can get the federal tax credit and how buyers, dealers, and manufacturers must document eligibility.
What the IRS rules say about the American-made vehicle tax break
The core requirement is final assembly in North America for a vehicle to be eligible for the federal new clean vehicle credit. The IRS guidance clarifies documentation, manufacturer certification, and how the credit is split into component tests.
The credit can be worth up to $7,500, but meeting that full amount depends on two separate supply-chain tests: critical minerals sourcing and battery components sourcing. The IRS explains how manufacturers must disclose status and how taxpayers can verify eligibility.
Key eligibility points for the American-made vehicle tax break
- Final assembly must occur in North America (United States, Canada, Mexico).
- Vehicles must meet battery critical minerals and battery components sourcing or cost thresholds for the full credit.
- Income and manufacturer-specified vehicle price caps may apply.
- Manufacturers must certify vehicles and provide a VIN-based eligibility method for buyers and the IRS.
- Buyers can often claim the credit at tax time or receive it at point-of-sale if dealer transfer rules apply.
How to check if a vehicle qualifies
Follow these practical steps before you buy or claim the credit. Doing this reduces surprises during tax filing.
Step-by-step checklist
- Confirm the vehicle model year and that it is a qualifying new clean vehicle under current IRS rules.
- Check final assembly location with the manufacturer or a Department of Energy/IRS lookup tool.
- Ask the dealer for the manufacturer certification or look up the VIN on the government eligibility list.
- Verify whether the vehicle meets the critical minerals and battery component criteria for the full $7,500, or a partial amount.
- Ensure your modified adjusted gross income (AGI) and the vehicle’s MSRP are below official caps.
- Keep the manufacturer statement, dealer invoice, and any point-of-sale credit paperwork for your records.
How to claim the tax break
The IRS allows two main ways to claim the credit. You can claim it on your federal income tax return or accept a point-of-sale reduction of the purchase price if the dealer offers the transfer option.
If you claim at tax time, you will fill out the applicable IRS form for the new qualified plug-in electric drive motor vehicle credit and attach required documentation. If you take the credit at purchase, the dealer usually handles certification and provides paperwork you should save.
Documentation to keep
- Manufacturer certification or VIN eligibility printout.
- Sales contract showing whether the credit was applied at point-of-sale.
- Copies of the vehicle invoice, registration, and title.
- Any dealer statements or IRS forms used when transferring the credit.
The federal credit is effectively split into two halves: one tied to critical minerals in the battery and one tied to battery component sourcing. Meeting both halves is necessary to claim the full $7,500 in most cases.
Common reasons a vehicle is ineligible
Some buyers assume any electric vehicle qualifies. The IRS rules remove that assumption. Here are common disqualifiers to watch for.
- Final assembly outside North America.
- Manufacturer has not certified the vehicle for the credit or the VIN is not on the eligibility list.
- Vehicle price or buyer income exceed IRS limits for the credit year.
- Battery critical minerals or components do not meet sourcing or cost thresholds.
Small case study: How the rules work in practice
Maria, a teacher, considered a new electric SUV assembled in Tennessee. She checked the manufacturer’s website and found a VIN eligibility lookup. The VIN showed the vehicle met final assembly and both battery tests.
Her AGI was under the IRS income limit, and the vehicle MSRP met the cap. At purchase the dealer applied the credit at the point of sale and reduced her financing by the agreed amount. Maria kept the manufacturer certification and the dealer paperwork in her records in case the IRS asks for proof.
Practical tips for buyers and dealers
- Buyers: Ask for the manufacturer’s certification and a VIN-based eligibility printout before signing a purchase order.
- Dealers: Keep clear vendor and manufacturer documentation; ensure paperwork is given to buyers for tax filing.
- Both: Check the IRS and Department of Energy tools for the latest lists—guidance and lists can change as manufacturers update sourcing.
When to consult a tax professional
If your financial situation is complex, or if you plan to claim the credit rather than take it at purchase, consult a tax professional. They can help confirm AGI limits, filing steps, and recordkeeping requirements specific to your situation.
The IRS guidance puts more responsibility on manufacturers and dealers to certify eligibility, and on buyers to confirm it before relying on the credit. Taking the checklist steps above will help you avoid surprises at tax time and ensure you get the right benefit when a vehicle qualifies.
