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Kia Plug-In Vehicles Lose Eligibility For U.S. Federal Tax Credit

Earlier this week, when President Joe Biden signed the Inflation Reduction Act (IRA) into law, Kia vehicles and those from several other automakers lost eligibility for the U.S. federal tax incentive of up to $7,500.

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A large number of car buyers were forced to reconsider their options and or sign sales agreements for vehicles they may still be waiting on since the new bill was passed. The amount of stress and confusion this situation created is hard to measure, but it is perhaps sufficient to say it was not ideal and quite a hassle for all of those impacted. Manufacturers, including Kia, did reach out to their dealer networks to encourage them to try and complete sales agreements that would allow as many people as possible to secure access to the previous tax incentive before the new one replaced it on Tuesday this week. According to InsideEVs, Kia called out the sudden change in plug-in vehicle tax incentives for the U.S. market as “very disruptive to our business and unfortunately for our customers”, and they weren’t the only automaker to do so.

Given the restrictions on eligibility that the new law imposes, which becomes more restrictive over time, Green Car Reports has suggested that only 14 vehicles on sale at the start of 2023 will be eligible for the incentive the IRA has now established. 8 of those vehicles are electric vehicles (EVs) and 6 are plug-in hybrids (PHEVs). Only 2 of these 14 models are from foreign brands (Nissan and VW), though one might say that Chrysler and Jeep are foreign brands since they are part of the Stellantis conglomerate that formed when Fiat Chrysler merged with the PSA Group last year. Sadly for U.S. consumers, the IRA greatly reduces the up front affordability of many plug-in vehicle options since automakers like Kia and Hyundai currently offer the largest selection of EVs as well as PHEVs at price points close to or below the average price of a new vehicle.

While the intention of the IRA is to spur more investment in U.S. based manufacturing and employment, and certainly more vehicle choices that are eligible for the incentive are coming to market eventually, it is possible that the IRA will not achieve these goals, or at least not as rapidly as it could. This could be the case if manufacturers are unable to quickly take actions to move manufacturing and materials sourcing to the U.S. and free trade partner countries. Then again, Tesla lost its eligibility for the previous tax incentive in 2019 and it did not seem to slow down their sales by any appreciable amount. Tesla is in a class by itself though, considering all of its brand clout, dominance in the supply chain and logistics, technological savvy, and the critical “super charging” infrastructure they have pioneered.

To try and get a limited sense for how this new law and the sudden loss of incentives impacted U.S. plug-in vehicle shoppers, I asked people on social media how this might have impacted their decisions. I got several responses in the span of a few hours. Here’s a breakdown of what people said in answers to my questions about how the loss of the incentive may have impacted their decision on whether to continue to pursue a Kia purchase or to consider other options:

9 respondents said they likely would not consider the same Kia plug-in vehicle. They would choose either another EV or PHEV that still qualifies for an incentive, they would choose a regular hybrid or gas powered vehicle that wasn’t eligible for incentives in the first place, or they may still consider one if the fuel savings worked out vs. other options both plug-in and non plug-in. It all came down to the numbers for these people and without the incentive, they weren’t interested or they were much less likely to buy depending on the calculus involved.

5 respondents said they would still consider a Kia plug-in or other vehicle that didn’t qualify for the incentives because either it wasn’t about the incentive in the first place, or because they still want the features of the plug-in vehicle, regardless of price, or they felt like the math would work out well enough in their cases.

What would you do in this situation? Are you looking forward to the outcomes of the new IRA incentives, or do you think there are flaws in the new federal approach to encouraging more plug-in vehicle sales? Please leave your comments or questions below.

Images courtesy of Kia and Justin Hart.

Justin Hart has owned and driven electric vehicles for over 14 years, including a first generation Nissan LEAF, second generation Chevy Volt, Tesla Model 3, an electric bicycle and most recently a Kia Sorento PHEV. He is also an avid SUP rider, poet, photographer and wine lover. He enjoys taking long EV and PHEV road trips to beautiful and serene places with the people he loves. Follow Justin on Twitter for daily KIA EV news coverage.

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Comments

steve wiley (not verified)    August 24, 2022 - 2:10PM

wow, we just bought a kia plug in hybrid on 8/20/22. we just found out today that it does not qualify for the tax rebate. That is one of of the key reasons we bought the car. this is absolutely outrageous. It was supposed to go into affect at the beginning of 2023. I am in shock right now.....

Robyn Eriwata … (not verified)    August 25, 2022 - 7:28PM

In reply to by steve wiley (not verified)

I was about to order the new Kia Sportage plugin hybrid but without the tax incentive it does not make sense financially. I thought that the incentives were going to continue until December 31st, That does not seem fair to make the change with so little notice.

Justin Hart    August 30, 2022 - 3:34AM

In reply to by Robyn Eriwata … (not verified)

I whole heartedly agree. Congress should have given people at least a little more notice than the 10 days or so between it passing in the Senate and being signed into law by the president. A month, or even until the end of the tax year would have been just a little more reasonable and it seems odd that they did it the way they did. If Kia is smart, they will put pressure on their dealers to stop all the mark-ups on plug-in vehicles… and if they happen to do that successfully, it’s possible that Kia’s PHEVs are still price competitive with the vehicles that still do get the new incentive. I say that only because Ford and GM have already announced price hikes for all their rebate eligible vehicles for the 2023 model years that are roughly about the same as the new rebate.

David Denton (not verified)    January 23, 2023 - 1:01AM

In reply to by Justin Hart

I also was disappointed in the details of the law, especially since getting a PHEV like the RAV4 Prime became extremely expensive and hard because of the Pandemic and supply issues. Many dealers used the shortage of vehicles to add ridiculous mark ups to the MSRP. So wait and and see what will be manufactured in USA so as to meet new law rules or buy a straight hybrid. The issue will not be helped any by fact that the Chevy Equinox and Blazer due in the fall of 2023 are being built in Mexico and thus not eligible for the tax credit. I think Congress really acted too fast and did not understand that to the potential middle-class buyer of EVs the credit was a big incentive. If the goal is to electrify vehicles on America’s highways our lawmakers screwed up!

Justin Hart    August 30, 2022 - 3:30AM

In reply to by steve wiley (not verified)

Very sorry that happened to you Steve. It is very shortsighted the way that congress decided to implement the new benefit and override the expiring benefit. The least they could have done is give people more time, perhaps until the end of the tax year or at least more about 10 days notice. I do hope you might qualify for some other benefits (state or local), at least. I’d consider writing a letter to your congresspersons to humbly share your feedback and perhaps request they consider retroactively applying the expiring benefit through the end of the tax year, if you feel like that might help (if for no other reason than catharsis).

Reggie S (not verified)    August 28, 2022 - 10:43AM

Hmmm,

Really confused you say only 2 foreign companies are eligible but if you go to the fuel economy dot gov page multiple foreign vehicles are eligible. We just bought a Volvo and the dealership gave us the tax eligibility form.

Justin Hart    August 30, 2022 - 3:50AM

In reply to by Reggie S (not verified)

I suspect that is because fuel economy.gov has not updated its website yet. Here’s a very good run down (see URL below), but note the “could qualify” list vs the list that did qualify until 8/16. As far as I know, no Volvo plug-in vehicles sold in the U.S. after 8/16, UNLESS they have a binding sales contract from before that date, will be eligible for federal tax incentives until Volvo moves production to the U.S. and sources battery components and minerals from US or free trade countries. I am not an accountant though, so you should seek a professional opinion.

https://electrek.co/2022/08/21/which-electric-vehicles-still-qualify-for-us-federal-tax-credit/

Robert (not verified)    November 19, 2022 - 11:24PM

So is it true that 2023 Kia Sorento PHEVs don't qualify for the tax credit, even if delivered by the end of 2022? It looks like the official lists just show that the 2022 is eligible?

Justin Hart    November 22, 2022 - 2:42AM

In reply to by Robert (not verified)

As far as I know, even the 2022’s lost eligibility for the tax credit after Biden signed the IRA into law. I could be wrong, but this is my understanding from reading extensively about it. But, as I understand, and have written about in other articles, there may be a revision/new law passed that allows for a grace period for automakers to move production to the U.S., basically. Regardless, Kia, Hyundai and Genesis are moving as quickly as they can to produce their plug-in vehicles in the U.S. so that they may be eligible for the federal incentives again. Be on the look out for that to happen as soon as next year, or in 2024. I doubt anything will change for this year though, and if you didn’t buy your Sorento PHEV before Biden signed the IRA, or sign a bill of sale at least… then you may not be eligible for any federal incentive, for the current tax year.

Nancy (not verified)    February 4, 2023 - 5:47PM

This is insane. I was told there was a 7500.00 if purchased prior to 12/2022 I purchased 2023 Kia sorrento plug in hybrid 11/30/22.

One IRS site says I get a 6587.00 tax credit and another IRS site says This

“manufacturer has entered into a written agreement with us to become a "qualified manufacturer" but hasn't yet submitted a list of specific makes and models that are eligible. Please check back here for updated information.”

Wonder if something is still going to let us deduct this credit.

Plus I had to pay a higher sales tax because it was over 50,000.00 what the heck is wrong with these people running this country. They want you to go green but then punish you for trying to do so?

JustinHart (not verified)    February 8, 2023 - 2:23AM

In reply to by Nancy (not verified)

Hi Nancy! I am truly sorry you’re getting conflicting information, and I sympathize… the IRA (Inflation Reduction Act) certainly was a… hastily written, poorly conceived piece of legislation that had good “intent” but poor execution. You can blame the U.S. congress first and foremost, for being “all over the place” on it. In any case, the Sorento PHEV NEVER qualified for $7,500 in rebate before or after the IRA passed. Wherever that information came from, it was simply flat wrong. The $6,587 was available, however, for anyone that bought one before IRA passed (as long as they payed that much in federal income taxes or more) and after it passed…. that is clear as mud. I would talk to a CPA or professional tax accountant because, depending on when you too delivery of your Sorento, you may, or may not be eligible for a federal tax rebate. Hopefully you are, and you get the full $6,587. Also check to see if you might be eligible for a state or local tax incentive or other incentives (about 1/3 of states have something… for example a smaller rebate than the federal one, free or discounted charging equipment, etc.). I share your sentiment about the “punishing” aspect of much legislation too. I live in a state that proclaims their support of the transition to plug-in vehicles, yet double, and triple “taxes” those who buy more efficient plug in and standard hybrids. Of course on the surface the reason they do this is to make up for less revenue collected via gas tax, and so to some extent it makes sense that they need to collect a higher rate/more fees… but they end up “taxing” green vehicles at a rate that is around 2x higher than regular gas powered vehicles and thus penalize those who are making better choices. It’s screwball logic and very poorly handled by the government in my experience as well.

Vincent Hendrix (not verified)    July 27, 2023 - 10:09PM

In reply to by JustinHart (not verified)

The sad thing is that with climate change and global warming in the news every day, now is the time when the world needs as many drivers as possible to move from internal combustion engine vehicles to PHEV's or EV's. The tax incentive might have moved more driving consumers that direction, but leave it to bad and wrong government policy to ruin that possibility. I just finished writing a essay paper on the benefits of every driver moving to an HPEV or EV and how it would help in the fight against global warming. It was a call to arms to fight the climate change crisis, a problem that is much worse than scientists and climate experts thought. Very sad that our senators and those in congress are not there for the right reasons, and very rarely work to solve important issues like global warming.