Which BHEV may qualify for the US Federal Emissions Tax Credit?

Do you want to be eligible for a new electric vehicle tax credit with your PHEV purchase? Here’s everything you need to know and a brief list of PHEVs potentially eligible for US federal tax credit.

Inflation Reduction Act of August 2022 changed the eligibility criteria to allow plug-in hybrid electrical vehicles (PHEVs), for the clean US federal vehicle tax credit. The US federal tax credit was not available for PHEVs produced in North America after August 16th. The sales cap will still apply until 2022. However, some PHEVs may not be eligible for credit until January 1, 2023.

It is important to act fast if you are interested in buying a hybrid vehicle. Beginning January 1, 2023, there will be increasingly difficult eligibility requirements. These include factors such as sourcing critical minerals, manufacturing batteries, income thresholds, price caps, and price caps.

The new rules for US federal tax credits for PHEV-2023

On January 1, 2023, the new eligibility criteria for the clean US federal vehicle tax credit became effective. The requirements for both the PHEV buyer and owner must be met. To qualify for the PHEV that will start in January 2023, you must meet these requirements:

  • A PHEV sedan should have an MSRP of less than $55,000.
  • A PHEV truck/SUV must have an MSRP below $80,000.
  • 40% or more production materials must be obtained from North America or an open-trade partner.
  • Single purchasers must have a maximum annual income of $150,000.
  • The combined earnings of purchasers who file taxes must not exceed $300,000.

A PHEV must possess at least 50% of its components made in North America to continue being eligible for the clean US federal vehicle tax credit. This percentage rises to:

  • 60% on PHEVs put into service in 2024 or 2025.
  • 70% for PHEVs put into service in 2026.
  • 80% for PHEVs put into service in 2027.
  • 90% of PHEVs put into service in 2028.

Any new PHEVs must be made in North America after December 31, 2028, to qualify for the tax credit.

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Which PHEVs can be eligible for the US Federal tax credit 2023?

As the IRA was enacted into law in August 2022 by the Alliance for Automotive Innovation which represents VW, GM Toyota, Ford, and other carmakers, it stated that none would receive full credit for eligible EVs or PHEVs as long as additional sourcing requirements are met Zero.

Audi of America (Porsche) and Kia both claim that their cars don’t meet the “made in America” rules. Volkswagen says only the Audi PHEV of its brand will be eligible for credit. However, the Alternative Fuels Data Center has not yet included a 2023 Audi PHEV on the provisional list of vehicles that are qualified.

At this point, only two 2023 PHEVs seem to be eligible to receive the US federal clean vehicles tax credit for 2023. There is also a possibility that some models from 2022 will still qualify. Automakers need to provide more information about assembly and sourcing to allow us to add PHEVs most likely to qualify to receive the full $7,000.50 in 2023.

1-BMW 330e Sedan (PHEV).

BMW 330e plugin hybrid electric sports sedan is faster than its ICE counterpart (the 330i) and can accelerate to 60 mph in 5.6 seconds. It boasts 288 HP, a 5-seater, and a luxurious interior.

The bad news. Both the 330e PHEVs come with a 12 kWh high voltage lithium-ion batteries pack. This makes them hardly PHEVs and allows for only short local trips (less than 22 miles) using electricity only. A 32-mile average commute is possible in the US. It is important to have a charge station at work to drive all-electric.

The 330e sedan has a range of 22 miles with electric only. The average American two-way commute is 32 miles. If you don’t have an electric charger, this means you’ll need gas.

These PHEVs have a lower fuel efficiency than their gasoline counterparts. The EPA has estimated that the 330e is capable of 28 mpg and the 330i can achieve 30 mpg.

A full-charged 330e battery with full tank fuel will provide a range of up to 320 miles. This is 30 less than that of the x-Drive PHEV and 468 more than the 330i. This is because the PHEVs are smaller in fuel tanks – 10.6 gallons versus 15.6 gallons in ICE 330i.

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The 330e emits 160g per mile of tailpipe gases, which is slightly less than the x-Drive and more than other PHEVs.

A full Lithium-Ion charge can be obtained in as little as 10.9 hours with 120 V.

The 330e Series has many benefits. For example, it can be maintained less frequently, produces less noise, and gives you some acceleration. The 330e series also allows you to have a fancy biker.

BMW offers the following warranties: A 4-year, 50,000-mile Limited Warranty for its 2023-330e; a 12-year Unlimited-Mileage Rust Perforation Limited Warranty, and a 4-year Unlimited-Mileage Roadside Assistance Program.

2-BMW 330e x-Drive (PHEV)

The all-wheel drive BMW 330e x-Drive PHEV is very similar in design to the 330e sedan. It features a turbo-powered 2.0 L, 4-cylinder engine (S8) and will travel just 290 m with both gas and electricity combined.

The BMW 330e x-Drive PHEV’s electric drive range is only 20 miles. This is terrible for a PHEV that was launched in 2023. It won’t even cover a typical one-way commute for most drivers.

The 2022 model was similar in performance, so the 2023 x-Drive appears to be comparable. It is expected to get 67 MPGe (gas and electric) and a meager 25 mpg (gas).

The real kicker is this: The Ford Escape is PHEV emits more tailpipe emissions than the 330exDrive. This PHEV emits more tailpipe emissions than any other PHEV at a staggering 192g/mile.

The BMW 330e x-Drive is more fuel-efficient than its gasoline-powered counterpart, while the 330i x-Drive averages 28 mpg. This means that while the BMW 330exDrive may be eligible to claim the clean-vehicle tax credit for this vehicle, bragging rights about being “cleaner” are quite limited. If you go all-electric, you’ll likely save more money at the pump than the $7500 credit.

3-2023 Ford Escape (PHEV)

Ford Escape PHEV ranks among the top PHEVs in terms of fuel economy, range and speed. It is also significantly cheaper than many PHEVs and can be fueled with regular gas, saving you even more.

This 2.5L, 4-cylinder front-wheel driven PHEV with an automatic transmission has the lowest tailpipe emissions. It emits 77 grams per mile. The Volvo S60 extended mileage is the closest, at 99 g/mile.

The Escape has a combined fuel economy of 105 MPGe (electric and gas) and a gas mileage of 40 mpg (gas alone). The 96-kW DCPM battery can be charged completely in 3.3 hours with 240 V.

Although the Escape is not as luxurious a PHEV compared to the BMW X5 & Volvo S60 it’s difficult to beat for fuel economy, affordability, and range. Ford Escape PHEV is a good choice if you enjoy long commutes, are interested in road trips, but don’t intend to do any off-roading.

A 2022 Ford Escape PHEV might cost less than $28k, thanks to a $7500 tax credit’s investments made in local batteries and crucial mineral supply chains means that this vehicle will likely continue to be eligible to receive the credit in 2023.

However, at the moment the AFDC does NOT list the 2023 Ford Escape PHEV among the qualifying PHEVs.

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How to identify where a vehicle is assembled?

Some PHEVs are assembled at multiple locations. Therefore, while a single PHEV can qualify for the US Federal tax credits under the new rules; an identical PHEV, however, might not.

How can you determine where a particular PHEV was assembled? Look for the VIN of the vehicle to verify the manufacturing site. This number is usually located inside the passenger side doors.

Type your VIN into VIN Decoder, a website operated by the National Highway Traffic Safety Administration. If the specific PHEV you are referring to was manufactured in North America, then you will be eligible for the tax credit.


It is too late for automakers to update their sourcing and assembly methods to meet new requirements. Many automakers instead are looking to sign contracts with new suppliers, and to open North American assembly plants. This will allow their EVs and/or PHEVs to be eligible for US Federal tax credits.

Some automakers are already ahead of the pack. Ford Ion Park in the US, for example, is investing $185 million to build a battery plant. Ford will be able to make its owner cells and complete batteries all in the US. with this lab.

GM and Honda will also be able to collaborate on vehicle platform sharing. Honda can design and build cars using GM’s EV technology, and vice versa. In 2024, the Prologue SUV – which has been co-developed by Honda/GM – will be available for purchase. GM plans also to produce its Cadillac Lyriq EV from its Tennessee plant. This will allow it to be eligible for the EV Tax Credit. Although the Chevrolet Corvette is expected to be offered in 2023 as a Plug-In Hybrid PHEV, likely, it will not qualify for the tax credit due to the price cap.

In the future, Toyota models could be eligible for tax incentives. Because the automaker will be investing $2.5 million in a North Carolina-based battery plant, this is possible. Volvo also plans to launch an American-made Polestar 3 SUV in 2023 with a Polestar 4-SUV coupe in 2024. Volvo plans to launch a Polestar 5 four-door GT in 2024. They will be manufactured in the U.S. however they must comply with the requirements for battery assembly and mineral extraction, as well as price caps before they are eligible to receive any or all tax credits.

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