2023 VW ID.4 Now Gets Full Federal Tax Credit. Confused Yet?

If car shopping weren’t hard enough already, now it’s time to become a part-time accountant and tax attorney.

byAaron Cole|
Volkswagen News photo

If watching the rules change for electric vehicle incentives wasn’t confusing enough, it’s time to start watching supply chains. That’s because Volkswagen announced Wednesday—just one day after it was ruled ineligible for the full EV tax credit—that its ID.4 now qualified for the full $7,500 tax credit.

“The ID.4 is already one of the lowest-priced electric SUVs on the market, and the $7,500 Federal Tax Credit makes it even more attainable,” Volkswagen of America President Pablo Di Si said in a statement. “This shows that we made the right decision to localize production of the ID.4 in Tennessee and invest even further in battery production, components and innovation. Every ID.4 sold supports thousands of American jobs and helps advance our goal of a carbon-neutral future.”

Earlier this week, the list of eligible cars for the full $7,500 tax credit winnowed significantly from nearly 30 to just nine. The ID.4’s eligibility adds one more to the list toward the more affordable end of the range as well, with a starting price of less than $40,000 before federal and applicable state incentives.

That’s because while the average new car price dropped last month to just over $48,000, the average price paid for a new electric car remained close to $60,000, according to Kelley Blue Book. Sedans that cost more than $55,000 are ineligible for a federal credit, and SUVs that cost more than $80,000 are also excluded.

That will lead automakers to shore up their assembly and battery-sourcing locations to secure the federal tax credit to lure buyers. Nissan has said it would take until 2026 to localize production of its electric cars in the U.S. to take advantage of the credit for buyers, although leased electric vehicles still qualify for the break. (Leased vehicles are technically fleet vehicles owned by the leasing company and don’t have to comply with the regulations.)

It's all the more confusing for buyers looking to purchase an electric car and take advantage of available tax credits. Where the car comes from makes a difference, but so now does where all the car's parts, too. 

Got a tip? Send it in to tips@thedrive.com