Beatrice Lang
Electric vehicles are becoming increasingly popular, and with the various tax credits available, they are also becoming more affordable. In 2024, the federal tax credit for buying a new electric vehicle was up to $7,500, and $4,000 for a used one. To qualify for the tax credit, vehicles must meet certain requirements, including being manufactured in North America and having a price below $80,000 for an SUV or $55,000 for a sedan. So, which Toyota models qualify for this electric vehicle tax deduction?
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Toyota Mirai
The Toyota Mirai is a hydrogen-powered Fuel Cell Electric Vehicle (FCEV). It uses a fuel cell to convert hydrogen gas into electricity, which powers the vehicle. This process creates zero tailpipe emissions, with water being the only by-product. The Mirai is currently in its second generation and has been available since 2015.
The Mirai is distinct from most electric vehicles as it does not use high-capacity batteries or charging stations. Instead, it relies on hydrogen from a fuelling station pump, similar to a traditional gasoline station. The Mirai has an impressive range, with the XLE model offering 402 miles per fill-up of hydrogen, and the Limited model providing an estimated 357 miles.
The Mirai is only available for purchase in California due to the limited hydrogen refuelling infrastructure. However, Toyota offers the vehicle with a \$15,000 fuel credit or complimentary fuel for a certain period.
In terms of performance, the Mirai is slower than other EVs, taking 9.1 seconds to reach 60 mph. However, it offers a refined ride and lively handling, making it surprisingly enjoyable to drive. The interior is well-appointed and elegant, with a design comparable to that of a Lexus sedan.
Regarding tax credits, hydrogen fuel cell electric vehicles like the Mirai are explicitly mentioned in the Inflation Reduction Act. However, as of 2025, no hydrogen-powered vehicles qualify for a tax credit for vehicle purchases, likely due to not being assembled in North America. A possible option to still benefit from a tax credit with the Mirai is to lease the vehicle. In this case, the automaker can choose to use the tax credit as a discount towards the lease, although they are not obligated to do so.
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Federal tax credits
The eligibility criteria for these tax credits have changed over time, with new rules introduced in 2022 regarding buyer eligibility and battery sourcing. The complex battery requirements, aimed at reducing dependence on foreign sourcing, are tightened annually over the current 10-year program, resulting in frequent changes to the list of qualifying vehicles. For example, in 2023, the rules required minimums on battery component production and the sourcing of key battery materials ("critical minerals") from specific countries. These requirements further tightened in 2025, resulting in a significant reduction in the number of new EVs and PHEVs that qualified for the credit.
To qualify for the tax credit, vehicles must be manufactured in North America and meet certain price caps. For 2025, the MSRP cap is $55,000 for cars and $80,000 for SUVs, trucks, and vans. Additionally, there are income limits for buyers, with a modified adjusted gross income of $150,000 for single filers and $300,000 for married couples filing jointly. These income limits have remained unchanged from 2024 to 2025.
While the specific Toyota models that qualify for the electric vehicle federal tax credit are not explicitly mentioned, it is known that Toyota offers its Camry model, a hybrid-only vehicle, with incentives in the form of tax credits and rebates. Therefore, it is likely that certain Toyota models, such as the Camry, qualify for the federal tax credit, provided they meet the eligibility criteria.
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Assembly in North America
To qualify for the federal EV tax credit, a vehicle must be assembled in North America. This requirement came into effect in 2022 and applies to vehicles purchased through 2032. Final assembly must occur in the US, Canada, or Mexico, and the vehicle must be purchased for original use by the taxpayer.
The Department of Energy provides a VIN check tool to confirm the assembly location for your specific vehicle. The Department of Transportation's NHTSA also provides a VIN decoder to identify a vehicle's build plant, country of manufacture, and other details.
It is important to note that the requirement for assembly in North America does not apply to leased vehicles. Leased EVs qualify for a separate EV credit program that provides a $7,500 "commercial credit" for light-duty vehicles acquired by businesses, including leasing companies.
To qualify for the full $7,500 federal EV tax credit, the vehicle must also meet critical minerals and battery component requirements. At least 50% of the vehicle's battery components must be produced or assembled in North America, and at least 40% of critical minerals must be extracted or processed in the US or a country with a free trade agreement with the US. These requirements will become stricter over time, increasing by 10% each year through 2027.
In addition to the assembly and battery requirements, there are price caps and income limits for buyers to be eligible for the tax credit. The price caps are set at $55,000 for cars, wagons, and hatchbacks, and $80,000 for SUVs, vans, and light trucks. The income limits vary depending on filing status, with single filers needing a taxable income of at least $55,400, head of household filers requiring $62,700, and joint filers needing $66,150 to qualify for the full credit.
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Income limits
For new vehicles, the income limits are based on the buyer's modified adjusted gross income (MAGI) or adjusted gross income (AGI). As of 2025, the limits are as follows:
- $300,000 for married couples filing jointly or a surviving spouse.
- $225,000 for heads of households.
- $150,000 for individuals.
These income limits have remained unchanged from the previous year. It's important to note that the income thresholds are based on the buyer's tax filing status, and they apply to the tax year in which the vehicle is purchased.
For used vehicles, the income limits are lower. As of 2023, a federal income tax credit of up to $4,000 or 30% of the sale price (whichever is lower) is available for the purchase of a qualifying used EV. To be eligible, the buyer's AGI must not exceed:
- $75,000 for individuals.
- $150,000 for a joint return.
- $112,000 for heads of households.
It's worth noting that leased vehicles have different considerations. Leased EVs and PHEVs are generally not subject to the same income restrictions as purchased vehicles. The income caps for buyers are irrelevant in the case of a lease because there is no direct purchase involved. However, it's important to remember that income limits may still apply when claiming tax credits for leased vehicles, and the specific rules can vary.
Additionally, it's important to stay informed about any changes or updates to the income limits and tax credit eligibility criteria. The requirements tend to become stricter over time, and staying informed can help you make informed decisions when purchasing an EV or PHEV.
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Price caps
The price caps for electric vehicle tax credits are based on the vehicle's manufacturer's suggested retail price (MSRP) and do not include the manufacturer's destination charge, optional items added by the dealer, or taxes and fees. The MSRP is the retail price suggested by the manufacturer, including manufacturer-installed options, accessories, and trim but excluding destination fees. The price caps vary depending on the type of vehicle. For SUVs, pickup trucks, and vans, the threshold is $80,000. For sedans, hatchbacks, wagons, and other vehicles, the credit cuts off at $55,000. These price caps are in place for new vehicles, and there are separate tax credits for used vehicles.
For used EVs, there is a tax credit of up to $4,000 or 30% of the sale price of the vehicle, whichever is lower. To qualify for this credit, the vehicle must have a sale price of $25,000 or less and must be a model from at least two years before the current calendar year. For example, a vehicle purchased in 2023 must be a 2021 model or older. Additionally, the vehicle must not have been resold before August 16, 2022, and it must be purchased from a licensed dealer.
It is important to note that these price caps and tax credits are subject to change over time, and buyers should stay informed about the latest requirements and eligibility criteria.
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Frequently asked questions
In November 2023, Toyota announced that it would make its Camry model, the best-selling sedan in the U.S., a hybrid-only vehicle. This means that the Camry model will qualify for the electric vehicle tax deduction. The Toyota Mirai, a hydrogen fuel cell electric vehicle, can also qualify for a tax credit if leased.
The electric vehicle tax deduction is a federal income tax credit of up to $7,500 for the purchase of a qualifying electric vehicle. The credit is available to individuals and businesses and can be claimed when filing your tax return.
To qualify for the electric vehicle tax deduction, the vehicle must meet certain requirements. These include the final assembly of the vehicle, which must occur in North America, and income thresholds for buyers and price caps on the vehicles purchased. The Department of Energy maintains a list of qualifying vehicles and their tax credits and price caps.
