Per the 2022 Inflation Reduction Act, the Volkswagen ID.4 only qualifies for half of the federal tax credit. While it’s assembled in North America, not enough of the battery components and/or critical materials are sourced from North America for it to qualify fully.
The federal government introduced a tax credit for
electric vehicles, hybrids, and plug-in hybrids in 2010 that could range from $2,500 to $7,500 depending on the details of the vehicle. However, the Inflation Reduction Act of 2022 changed the regulations for the electric vehicle federal tax credit starting January 1, 2023.
Some EV manufacturers were booted from the list of eligibility, some were added, and others remained unchanged. But where does Volkswagen stand for its electric vehicles like the ID.4? We’ll go over how the tax credit works and how much of the tax credit the Volkswagen ID.4 qualifies for here.
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Is the Volkswagen ID.4 still eligible for federal tax credit?
Partially. Under the new tax credit terms, a vehicle has to be (1) assembled in North America and (2) made with a certain percentage of battery components and critical minerals sourced from North America or a nation in the Free Trade Agreement to earn the full $7,500 credit.
So far, Volkswagen meets just the first credential. The Volkswagen ID.4 is put together right here in the US, at the German automaker’s
Chattanoogaplant, and thus is eligible for half of the $7,500 tax credit—$3,750.
Of course, there are more stipulations to getting the tax credit than where and with what your EV is made, so let’s go over the need-to-knows of the federal EV tax credit.
What you should know about the new federal EV tax credit requirements
When the federal EV tax credit was first introduced, its requirements stipulated that a vehicle would no longer be eligible if its manufacturer sold over 200,000 electric vehicles in total. As one might imagine, Tesla was out quite quickly and GM followed soon after.
Along with the manufacturer’s sale regulations, the federal government considered the EV’s battery construction, selling price, and the EV buyer’s income to determine eligibility. The Inflation Reduction Act of 2022 eliminated the sales cap but kept the other requirements, though the details changed a bit.
To qualify for the federal EV tax credit today, any electric SUV, van, or truck (including the ID.4) must come in at an MSRP of $80,000 or less, and any other type of vehicle has to have an MSRP of $55,000 or less. The starting trim of the 2023 Volkswagen ID.4 is priced at $38,995 MSRP and all other trims remain securely under $80k, so we’re all good here.
But the sales price isn’t the only money concerned. The EV buyer must meet income requirements to qualify for the tax credit. Anyone filing their taxes as an individual has to make $150,000 or less, heads of household must make $225,000 or less, and couples filing jointly can’t make more than $300,000.
Finally, the federal EV tax credit will only be applied to vehicles assembled in North America and:
- Made with at least 40% of its critical minerals sourced from North America and/or nations in the Free Trade Agreement
- Made with at least 50% of its battery components sourced from North America and/or nations in the Free Trade Agreement
If the EV in question doesn’t meet both battery requirements, it only qualifies for half of the credit, or $3,750.
Other electric vehicle incentives
So the Volkswagen ID.4 is eligible for half of the federal EV tax credit, and that’s great—but that isn’t the only incentive out there for electric vehicle buyers.
You’ll need to check out the details of your location to see what is available to you, but you may be able to secure some great state rebates and other tax credits for buying an EV or even installing at-home charging equipment.
Is the Volkswagen ID.4 still worth buying?
As it’s ineligible for half of the federal tax credit, the Volkswagen ID.4 may have moved out of your EV consideration—but maybe not!
Car and Driver ranks the ID.4 among the top five EVs of 2023, and the 2022 model earned the Insurance Institute of Highway Safety’s coveted Top Safety Pick+ award. The VW ID.4 Pro has an estimated range of 275 miles and a charging time of about 30 to 60 minutes on a DC Public Fast Charger.
The cabin takes both driver and passenger into consideration to make the interior roomy and comfortable throughout. Even the base trim comes with a solid list of standard features like IQ.DRIVE Advanced Drivers Assistance Technology that includes lane-keeping assist, adaptive cruise control, and active blind-spot monitors, plus a 12-inch touchscreen infotainment display and wireless charging devices.
The standard ID.4 starts at $38,995 and the top trim with all the bells and whistles included reaches just under $53,000. Whether or not that partial $3,750 federal EV tax credit is worth shelling out for this model depends on your budget and vehicle priorities—but it couldn’t hurt to at least ask your local VW dealer about it!
What to buy instead of a Volkswagen ID.4
If the ID.4 isn’t calling your name but you’re not ready to give up the hunt for an EV, don’t worry. Most manufacturers are producing or experimenting with fully electric or hybrid vehicles these days, so you have lots of options.
Not many automakers can claim both assembly and product sourcing from North America, so you may still have to make do with just half of the tax credit in some places and none in others. That being said, there is a solid lineup of EVs out in the world currently—here are a few for your consideration.
If you really want the federal tax credit: 2023 Ford Escape PHEV
Starting price: $36,950
Possible tax credit: $7,500
If the parameters of your electric vehicle hunt extend only as far as the federal tax credit goes, you may want to check out the
Ford Escape PHEV. Even with the Inflation Reduction Act requirements, the 2023 Escape PHEV could qualify for the full tax credit.
Plus, it’s roomy, relatively affordable, and can get you about 40 MPGe which is sure to save you money at the pump.
If you want a great PHEV: 2022 Hyundai Tucson SEL PHEV
Starting price: $35,975
Plug-in hybrid electric vehicles can make a great option for folks looking to dip their toe into the EV world, and the 2022
Hyundai TucsonSEL PHEV is a good place to start. With a starting MSRP of around $36,000, it’s one of the more affordable models on the market.
It comes with all-wheel drive, a range of 33 miles on one charge, and 80 MPGe combined fuel economy. The Tucson has a spacious and comfortable interior, a stylish exterior, and an amazing warranty package that includes a five-year/60,000-mile limited warranty, a 10-year/100,000-mile powertrain warranty, and three years or 36,000 miles of complimentary maintenance.
If you want to stick to all-electric: 2023 Hyundai Ioniq 5
Starting price: $41,245
Maximum range: 303 miles
Maybe the VW ID.4 appealed to you because it was all-electric and you’d prefer to stay in that realm. Well, the 2023 Hyundai Ioniq 5 could be your answer.
Car and Driver’s top-ranked EV, the Ioniq 5 is an impressive and relatively affordable all-electric SUV. The estimated maximum driving range is 303 miles and its power output can reach 320 horsepower in the top trims.
The only downside here is that the Hyundai Ioniq 5 does not qualify for the federal tax credit.
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