Toyota Prius Prime Tax Credit Eligibility

The Toyota Prius Prime is not eligible for federal tax credits, as it does not meet the requirements of the Inflation Reduction Act of August 2022.
Written by Amber Reed
Reviewed by Brittni Brinn
The Toyota Prius Prime plug-in hybrid electric vehicle (PHEV) is not eligible for a federal tax credit, as its final assembly doesn’t take place in North America
On August 16, 2022, the passage of the Inflation Reduction Act meant that more electric and hybrid vehicles would be once again eligible for a federal tax credit. While this is good news overall, new eligibility requirements mean that a lot of vehicles no longer meet the criteria for the tax credit—and one of those vehicles is the Toyota Prius Prime. 
But does the fact that you can’t get a tax credit mean that you should consider another option when you’re shopping for a hybrid vehicle? Let’s take a look at what these new requirements are, what they mean to you, and some other alternatives to consider if you’re in the market for an
or hybrid vehicle.
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Is the Toyota Prius Prime still eligible for a federal tax credit?

Unfortunately, no—as of August 16, 2022, the Toyota Prius Prime is no longer eligible for federal tax credits. 
But wait…it used to be eligible. What happened? If you’re confused, you’re not alone—let’s take a minute and shed some light on this before we continue! 
Here’s the deal: in 2010, a tax credit was implemented at the federal level that allowed for a credit of up to $7,500 for the purchase of certain new models of EVs and hybrids. At that time, there was a cap of 200,000 vehicles per manufacturer that would get the credit. 
and General Motors were the first ones to hit this mark, meaning from that point on, their vehicles were no longer eligible for the tax credit. Toyota reached the 200,000 vehicle limit in June of 2022 and began to implement the phase-out period for their tax credits. 
But then, the Inflation Reduction Act was signed in August of 2022. Although it did away with the 200,000 vehicle limit, it also implemented some new eligibility requirements. One of these was the stipulation that in order to get the tax credit, final assembly of the vehicle must take place in North America
Well, guess whose final assembly takes place in Japan? The Toyota Prius Prime. This means no federal tax credit for folks who purchase one—and this also applies to the
Toyota RAV 4 Prime
and the new all-electric Toyota bZ4X.

What you need to know about the new federal EV tax credit requirements

But that’s not the only new eligibility requirement that the Inflation Reduction Act introduced. While the Act’s passage meant that a lot more people could get the tax credit again, it also made some people and vehicles ineligible. Besides having its final assembly take place in North America, read on to see the other boxes that have to be checked before that sweet tax credit can be yours. 
To start with, there are some basic income requirements. If you file your taxes as a single person, you can only qualify if you have an annual income of $150,000 or less. If you file jointly with a spouse or partner, the cap is $300,000 annually. 
Starting in 2023, there are also eligibility criteria based on the price of the vehicle itself. Sedans and coupes need to be priced under $55,000 to qualify, while trucks, vans, and SUVs need to be priced under the $80,000 mark. If you’re
buying a used EV or hybrid
, the price cap is set at $25,000—no matter what kind of vehicle it is. 
The last requirement is the one that has some automakers in a bit of a sweat, and it’s also the reason that you might hear some vague language as to whether a vehicle will be eligible for a tax credit in 2023. In order to be eligible, the battery in an EV or hybrid must have a certain percentage of its battery material sourced either from North America or a free-trade partner of the US. But that’s not all—the batteries must be manufactured and assembled in North America
Currently, none of the EVs on the market meet this last requirement. Automakers are scrambling and there are some assertively optimistic claims being made, but it remains to be seen just how many vehicles will actually be eligible for the tax credit in 2023. So if you see some language that says a vehicle might be eligible for a tax credit in 2023, this stipulation is the reason why. 

Other electric vehicle incentives

But here’s the rest of the story: there are still plenty of incentives and good reasons to consider buying an EV or hybrid. Many states offer very generous incentives, and some local city and county governments do as well. 
California’s electric vehicle incentives
are quite generous, as are Oregon’s and Colorado’s. Check out the
electric vehicle rebates
available in your state, as there are plenty of perks to be had. And honestly, purchasing a vehicle that is friendlier to the environment is a reward in and of itself! 

Is the Toyota Prius Prime still worth buying? 

So, now that we know all of this, is the Toyota Prius Prime still worth buying? If you like it, sure! Here’s the thing—as a PHEV, the Toyota Prius Prime has some strong points, but it isn’t the strongest competitor overall
The 2022 Toyota Prius Prime is available in three trim levels and has an MSRP between $29,865 and $35,645. The 2022 model earned a mere 5.5/10 from Car and Driver, and a 7.2/10 from Edmunds—the issues were primarily an extremely bland driving experience and a low EV-only range of 25 miles. The sole powertrain option is a four-cylinder engine combined with a single electric motor, which yields a meek 121 horsepower.
But on the other hand, the overall fuel economy is an outstanding 133 MPGe and the safety ratings are tough to beat. Is the 2022 Toyota Prius Prime for you? It really depends on your tastes and priorities.
All of that being said, the 2023 Toyota Prius Prime looks to be an altogether different creature. No official pricing info has been released, but it’s estimated that it will start in the $32,000 and $38,000 range for its three trim levels. The 2023 model year is bringing a whole new redesign, as well as boosting the available horsepower to a more robust 220 ponies
Toyota claims that the EV-only range is improved as well, with a new range of just under 40 miles. The exterior has a sleek, almost sporty sheet metal look to it. The top trim level offers solar panels on the roof that can charge the battery when it’s parked, or accessory features like the A/C when you’re driving. 
No official reviews are available yet, but the newly redesigned Prius Prime has definitely piqued some interest. If you’re a hardcore Prius devotee, either model year is an efficient, economical choice. But if you want some more pep and pizzazz with your Prius Prime, then you’ll want to wait to test drive a 2023. 
MORE: Is the Toyota RAV4 Prime plug-in hybrid a good car? 
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Options to buy instead of a Toyota Prius Prime

The other bit of good news is that there are plenty of other options to choose from. The Prius may have started the hybrid and EV demographic party, but the guest list has been expanded significantly. Let’s take a quick look at some other hybrid and EV options for folks looking to go green!

Get that tax credit: 2023 Ford Escape PHEV

Starting price: $36,950
Possible tax credit: $7,500
Ford seems pretty confident about its ability to meet the new requirements of the federal tax credits in 2023. If they do, then the
Ford Escape PHEV
is a viable option for those who want the maximum rebate. This compact crossover has an abundance of standard safety features, a handsome exterior, and gets 37 miles of EV-only driving. 
MORE: Is the 2022 Ford Escape plug-in hybrid a good car?

All electric, all the time: 2023 Volkswagen ID.4

Starting price: $38,790
The all-electric
Volkswagen ID.4
earned an 8.5/10 from Car and Driver for the 2023 model year. Depending on the trim level, you can get 208 to 275 miles on a single charge. It’s available in front- or all-wheel drive and has an output of 201 to 295 horsepower. 
It may not be the most exciting EV out there, but the ID.4 offers a spacious interior, lots of storage, and the ability to drive right past the exit with all the gas stations. 

Hey, big spender: 2023 Porsche Cayenne Hybrid

Starting price: $87,950
Who cares about a rebate, you say? Won’t tolerate a poky driving experience just because you want a hybrid, you say? Meet the
Porsche Cayenne
Is it out of most people’s budgets? Yes. But if you want major luxury, pulse-pounding performance, and a hybrid engine, this 455-horsepower beauty is a serious contender. 
MORE: How to choose an eco-friendly car

Charge ahead: EVs are the future

No matter what new vehicles are released or legislation is passed, electric and hybrid vehicles are here to stay! With a wide variety of vehicles and price points to choose from, there’s sure to be an EV that fits everyone’s budget and lifestyle. And remember—even the most modern EV out there still needs good old-fashioned
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