Toyota RAV4 Prime Tax Credit Eligibility

The Toyota RAV4 Prime is no longer eligible for federal tax credits thanks to the August 2022 Inflation Reduction Act.
Written by R.E. Fulton
Reviewed by Kathleen Flear
Oct 5, 2022
As of August 16, 2022, the Toyota RAV4 Prime plug-in hybridelectric vehicle (PHEV) is no longer eligible for a federal tax credit since its final assembly doesn’t take place in North America
The federal government has offered tax incentives to electric car buyers since 2010, with credits from $2,500 to $7,500 depending on battery capacity. Toyota’s qualifying vehicles included the Toyota Prius Prime and RAV4 Prime plug-in hybrids—until the passage of a new inflation bill that makes vehicles assembled outside of North American ineligible for the credit. 
Now that the RAV4 Prime is ineligible for federal tax credits, should you still buy one?
Trusted insurance broker
and comparison app
Jerry
is here to help you weigh your options and save on
car insurance
. We’ll go over the advantages and disadvantages of buying the RAV4 Prime without the tax credit, then take a look at some great alternative PHEVs and electric SUVs. 
Finally, we’ll show you how to get state and local tax credits and save on
Toyota RAV4 Prime insurance costs
to make owning this awesome hybrid more affordable! 

Is the Toyota RAV4 Prime still eligible for federal tax credit?

No, the Toyota RAV4 Prime is no longer eligible for any federal tax credits from the IRS as of August 16, 2022
Let’s back up for some context. In 2010, the federal government introduced an EV tax credit of up to $7,500 for new electric vehicle purchases, with a cap for automakers who sold over 200,000 electric vehicles. General Motors and Tesla were the first two companies to meet that sales cap, meaning that their vehicles are no longer eligible for tax credits.  
Toyota hit the 200,000-vehicle threshold in June 2022 and was ready to phase out tax credits by October 2023—until President Biden signed the Inflation Reduction Act of 2022 in August, limiting federal EV tax credits to vehicles whose final assembly takes place in North America. 
As a result, the RAV4 Prime—Toyota’s popular plug-in hybrid compact SUV—is no longer eligible for any federal tax credits. Neither is the
Toyota Prius Prime
or Toyota’s much-touted bZ4Xall-electric SUV. 

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

Even for EVs assembled in North America, the new law puts in place pretty rigid eligibility requirements for the remaining federal tax credits. 
First, there are income requirements. Single car buyers only qualify if they make up to $150,000 a year, while buyers who file taxes jointly with a spouse have an income cap of $300,000. 
Further stipulations will take effect on the first day of 2023 concerning the price of the vehicle. Sedans under $55,000 will qualify for tax credits, while trucks, vans, and SUVs need to be under $80,000.Used vehicles, on the other hand, have a price cap of $25,000 across the board. 
But the biggest hurdle for automakers will be new requirements for battery construction. To qualify for tax credits, EV batteries will need to contain a certain percentage of materials from North America or a U.S. free-trade partner and be manufactured and assembled in North America. No electric vehicles currently on the market meet those requirements, meaning that it’ll be really difficult to get a federal tax credit in 2023. 
As those requirements roll out, more and more automakers are approaching the 200,000 vehicle cap on credits. Toyota is the most recent company to blow past that mark, but Nissan and Ford are both expected to reach that milestone by the end of the year or in early 2023. 

Other electric vehicle incentives

If all this sounds depressing, keep in mind that there are plenty of other incentives for electric vehicles and plug-in hybrids. These include state rebates plus rebates and tax credits to help cover the cost of installing an upgraded home charger. 
To figure out what you’re eligible for, you’ll need to check for incentive programs in your area. For example,
California’s electric vehicle incentives
include rebates up to $7,000. In Florida, on the other hand,
electric vehicle incentives
are limited to regional power authorities and range from a $100 rebate from the Kissimmee Utility Authority to tax credits up to $7,500 for Jacksonville Electric Authority customers. 
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Is the Toyota RAV4 Prime still worth buying? 

With all of this in mind, is it still worth buying a Toyota RAV4 Prime? Maybe
Even without the federal tax credit, the RAV4 Prime is
a formidable contender
in the plug-in hybrid market. Car and Driver gives an 8.5/10 rating, while Edmunds rates it a solid 7.8/10, placing it at #2 on its ranking of plug-in hybrid vehicles behind the
Chrysler Pacifica MPV
What makes the RAV4 Prime so good? Quick acceleration from the hybrid electric powertrain, an impressive 42 miles of driving range, and the same practicality and dependable performance that makes the regular RAV4 such a bestseller. It’s not the most exciting to drive, but it gets the job done. 
Is it worth the price? Starting at $41,515 MSRP, the 2022 Toyota RAV4 Prime might be $7,500 more expensive without the tax credit, but it’s still a decent value for a plug-in hybrid SUV—especially when you consider that the hybrid powertrain could more than halve your fuel costs.
Bottom line: the Toyota RAV4 Prime is still worth buying. But if you were eyeing the RAV4 Prime just for the tax credit or if your budget can’t quite stretch to that $41,000 mark, it might be worth looking at other options before you head to the dealership. 

What to buy instead of a Toyota RAV4 Prime

Just about every automaker—from
Kia
to
Mercedes
—has an electric or hybrid SUV these days. But which will still qualify for tax credits, and which are the best alternatives to the RAV4 Prime? 
Most of the vehicles that
still qualify for federal tax credits
based on their assembly location are luxury vehicles, trucks, or SUVs from manufacturers that have already hit their sales cap. The Audi Q5, BMW X5, and FordMustang Mach-E may all be eligible, but all three are considerably more expensive than the RAV4 Prime—as are Rivian’s three pickup trucks. Tesla and Chevrolet, meanwhile, have met the 200,000-vehicle limit, so their tax credits will be reduced or unavailable altogether. 
So what should you buy if you’re looking for a new car that saves on fuel costs but won’t break the bank? Here are our suggestions. 

If you really want the federal tax credit: 2022 Ford Escape PHEV

Starting price: $36,950
Possible tax credit: $7,500
One of the remaining vehicles that could be eligible for federal tax credits going forward is the Ford Escape PHEV. This roomy compact crossover is a great and affordable alternative to the RAV4 Prime with an EPA-estimated driving range of 37 miles in all-electric drive mode. As a regular hybrid, it gets about 40 miles to the gallon combined, which translates to huge savings on fuel
There’s one big drawback: while the Escape gets decent ratings from experts, it lacks an all-wheel drive option, which puts it slightly behind other plug-in SUVs in popularity. 
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If you just want a great PHEV: 2022 Hyundai Tucson SEL PHEV

Starting price: $35,975
If all-wheel drive is a priority and your budget lies somewhere between the sub-$30,000 sticker on the Ford Escape and the RAV4 Prime’s $41,000, the Hyundai Tucson might be your perfect fit. 
New for 2022, the Tucson PHEV can travel 33 miles on a single charge and get 80 MPGe combined. It also comes with the best new car warranty package in the business—a five-year/60,000-mile limited warranty, 10-year/100,00-mile powertrain warranty, and complimentary maintenance for three years or 36,000 miles. It’s spacious, quiet, and comfortable—and cheaper than a RAV4 Prime. 

If you’re ready to go all-electric: 2022 HyundaiIoniq 5 

Starting price: $41,245
Maximum range: 303 miles
If you’re ready to make the plunge into full battery-powered territory, there’s the HyundaiIoniq 5, a stylish all-electric SUV that’s cheaper than the RAV4 Prime and won Car and Driver’s 2022 EV of the Year award. 
The Ioniq 5 doesn’t qualify for tax credits, but it is a surprisingly affordable electric SUV with impressive specs: charging speeds up to 350 kW with DC fast chargers, a maximum driving range of 303 miles, and up to 320 horsepower depending on your powertrain selections. It’s built to stand out on the road, both from its futuristic design and its effortlessly stellar performance. 
Oh, and did we mention the semi-autonomous Highway Driver Assist 2 mode? Behind the wheel of the Ioniq 5, you’ll be saying “Tesla who?” 

How to save on electric car insurance costs

State and local incentives can still save you money on a new Toyota RAV4 Prime purchase—but you’ll have to be prepared to pay some pretty high insurance premiums. While
Toyota RAV4 insurance costs
are generally low thanks to the SUV’s affordable pricing and stellar safety ratings, RAV4 Prime owners are likely to see higher rates. 
If you’re paying more than you want to for your Toyota RAV4 Prime insurance, download the
Jerry
app. As a licensed broker with over 55 partner companies, Jerry can tell you in 45 seconds whether you’re overpaying—and help you find customized real-time quotes to lower your rate. 
“My policy covers two people and four cars: a truck, SUV, convertible, and muscle car.
Jerry
helped me go from paying $308 a month to $125 a month with the same coverage. I’m loving the savings.” —Jocelyn A.
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