Even before the new requirements passed on August 16, 2022, the 2021 Toyota Highlander Hybrid has never been eligible for the federal tax credit. As its hybrid engine still uses a combustion system, it is not considered an EV or PHEV.

Since 2010, the federal government has provided tax incentives for drivers to go electric. Toyota only had two vehicles that fulfilled the requirements for the federal tax credit—the

Toyota Prius Prime

and

RAV4 Prime

plug-in hybrids. However, a new inflation bill passed in the Summer of 2022 made EVs and PHEVs assembled outside of North America ineligible for the credit.

Unfortunately, the Toyota Highlander Hybrid was never in the running, even before the bill introduced new eligibility requirements. That said, there are other incentives available for eco-conscious drivers.

We’ll go over a few alternatives and provide some options in case you want to check out the

best electric vehicles

or plug-in hybrids for your next car!

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How to save on Toyota Highlander Hybrid insurance costs

Is the 2021 Toyota Highlander Hybrid eligible for federal tax credit?

No, the Toyota Highlander Hybrid is not eligible for the federal tax credit.

Originally, the federal EV tax credit was $7,500 for new electric vehicle purchases. But there was also a cap for automakers: after selling 200,000 EVs, their vehicles would no longer qualify for the tax credit.

General Motors

and

Tesla

were the first two companies to meet that sales cap, with Toyota following close behind in June 2022.

The Inflation Reduction Act of 2022 was activated in August, which further limited the federal EV tax credits to vehicles whose final assembly takes place in North America. Even if

Toyota

still qualified for the credit, this new rule put the RAV4 Prime and Prius Prime firmly outside of the new eligibility requirements.

What you should know about the new federal EV tax credit requirements

If you decide to buy a plug-in hybrid or electric vehicle to qualify for the federal tax credit, there are a few more rules to know:

Vehicle assembly requirements: The vehicle must have its final assembly performed in North America.

Income requirements: Car buyers who are single will only qualify if their salary is under $150,000 a year. Car buyers who jointly file taxes with a spouse or partner must have a combined income of under $300,000.

Price of the vehicle: New sedans must be under $55,000 to qualify. New trucks, vans, and SUVs must cost under $80,000. For used vehicles, there is a price cap of $25,000, regardless of the vehicle’s body type.

Battery construction. A certain percentage of the materials used in EV batteries must be from North America or a U.S. free-trade partner. The battery must be manufactured and assembled in North America.

With these new rules in place, it will be significantly more difficult to qualify for a federal tax credit. No electric vehicles currently on the market meet the battery requirements—what this will mean for 2023 vehicles is anyone’s guess.

Also, if you’re considering a

Nissan

Ford

, you may want to purchase one soon, as both manufacturers are expected to hit their 200,000 vehicle cap by early 2023.

MORE:

How to get a hybrid or electric car tax credit

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Other electric vehicle incentives

Even though buying a 2021 Toyota Highlander Hybrid won’t get you a federal tax credit, there are other incentives for drivers who choose to go green! Depending on where you live, there may be state rebates or credits provided by your utility company for owning a more eco-friendly vehicle. Plus, the main incentive for buying a hybrid is

saving money on gas

—which is a major perk considering the increasing fuel prices nationwide!

If you decide to buy an EV instead, you’ll have more options when it comes to tax credits and rebates.

California’s electric vehicle incentives

, for example, include rebates of up to $7,000, while

Florida electric vehicle incentives

are provided through local power authorities and range from a $100 rebate to tax credits of up to $7,500. If you want to apply for these incentives, make sure that the EV you’re thinking of buying will qualify before heading to the dealership!

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Toyota Highlander specs you should know

Is the 2021 Toyota Highlander Hybrid still worth buying?

You may be wondering: is the Highlander Hybrid worth buying even though you won’t get the federal tax credit?

The 2021 Toyota Highlander is a solid pick if you’re in the market for a three-row SUV. Car and Driver gives it an 8/10 rating and highlights the Highlander’s generous safety features, attractive design, and overall value.

The Hybrid comes equipped with a 2.5-liter four-cylinder engine and two electric motors that give you 243 horsepower combined. Paired with a continuously variable automatic transmission (CVT), you’ll have the choice of front- or all-wheel drive. Even though the acceleration is nothing to write home about, the hybrid powertrain is impressively fuel efficient at 35 mpg across the board!

The Hybrid has a starting price of $39,950 MSRP—even without the federal tax credit, the Highlander Hybrid is way more affordable than its rival, the hybrid

Ford Explorer

. Comparatively, you’ll pay $11,810 less for the Highlander Hybrid than the Explorer Hybrid!

Overall, the 2021 Highlander Hybrid is a great buy. It’s fuel efficient, significantly cheaper than the competition, and provides a safe and feature-full ride for the whole family!

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Are Toyotas expensive to maintain?

What to buy instead of a 2021 Toyota Highlander Hybrid

If you’re in the market for a newer vehicle, you know that everyone from

Kia

Mercedes

has an electric or hybrid SUV on the lineup these days. If your heart is set on getting that federal tax credit, or even if you want to see what other hybrids are out there, we’ve got a few suggestions to get you started.

If you really want the federal tax credit: 2022 Rivian R1S

Starting price: $79,800

Possible tax credit: $7,500

The 2022 Rivian R1S is a three-row electric SUV that is likely going to be eligible for the federal tax credit going forward. Car and Driver gives it a resounding 8.5/10 and an Editors’ Choice accolade for its off-road ability, premium interior, and exciting acceleration. With an EPA-estimated driving range of 316 miles and a payload capacity of 1800 pounds, the R1S performs very well for an EV.

The R1S is considerably more expensive than a hybrid model like the Highlander but is pretty comparable in price to other large EVs like the

Tesla Model Y

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Affordable electric cars that fit your budget

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If you just want a great hybrid: 2021 Kia Sorento

Starting price: $30,565

The 2021

Kia Sorento

will cost you less than a 2021 Toyota Highlander, and will still provide a hybrid powertrain with excellent fuel efficiency. Car and Driver gives it an 8.5/10 and an Editors’ Choice award as well!

With three rows, a handsome interior, and one of the best warranties in the industry, the 2021 Sorento is worth a second look. You’ll also get the benefit of EPA-estimated fuel economy ratings of 37 combined/39 city/35 highway mpg—a little bit better than the Highlander Hybrid.

MORE:

Everything you need to know about Kia electric cars

If you’re ready to go all-electric: 2022 Volkswagen ID.4

Starting price: $42,525

Maximum range: 280 miles

Another 8.5/10 scoring and Editors’ Choice award winner, the Volkswagen ID.4 is a great option for an electric SUV. Although there isn’t a third row, it’s still roomy and provides a serene driving experience. It’s much more affordable than a Tesla Model Y and has better features.

The high-tech styled controls can be a little bit of an adjustment, but the cargo space is plentiful and there are enough standard safety features to make up the difference.

MORE: How to choose an eco-friendly car

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