Does the RAV4 Prime Qualify for a Federal Tax Credit? (2023)

It’s only natural to try and get as much money off of your EV or hybrid vehicle as possible. With all of the tax rebates and incentives over the previous years, you want to search out what’s available to you. That leads you to wonder if the RAV4 Prime tax credit still exists and how much it is worth.

I cover the details of the RAV4 Prime federal tax credit status and discuss some changes that have occurred.

This guide is only for the RAV4 Prime. If you are wondering about the tax credit for the electric model, read our Toyota RAV4 Hybrid Tax Credit article instead. 

Affiliate Disclosure: As an Amazon Associate I earn from qualifying purchases at no additional cost to you. Thank you for supporting my website.

What Is the Federal Electric Vehicle Tax Credit?

The federal electric vehicle tax credit first arrived in 2010. The United States government provided an EV tax credit of up to $7,500 for new electric vehicle purchases. Automakers had a cap once 200,000 electric vehicles were sold.

This sales cap was met by Tesla and General Motors, making them unable to sell vehicles that are eligible. Toyota also hit this 200,000 vehicle mark in June of 2022. Without any further legislation, Toyota would have phased out the tax credits by October 2023.

Here is a helpful video explaining how federal EV tax credits work:

(Source)

Toyota RAV4 Prime Tax Credit Qualification Status

The Toyota RAV4 Prime used to qualify for a tax credit of up to $7,500, but it no longer qualifies.

Credits are phased out after a manufacturer sells 200,000 qualifying vehicles. As previously discussed, Toyota hit this sales mark in June of 2022. That should have allowed Toyota to qualify through October 2023. However, new legislation changed the rules.

In August of 2022, President Biden passed the Inflation Reduction Act. In this legislation, federal EV tax credits are limited to those where final assembly occurs in North America. Japanese plants are responsible for producing the RAV4 Prime model, making it ineligible.

Let’s look back at the previous rebates offered on the RAV4 Prime and other models from Toyota.

• 2021-2022 Toyota RAV4 Prime: $7,500 (Before 9-30-22)/ $3,750 (Remainder of 2022)
• 2012-2014 Toyota RAV4 EV: $7,500 (Before 9-30-22)/ $3,750 (Remainder of 2022)
• 2017-2022 Toyota Prius Prime: $4,502 (Before 9-30-22)/ $2,251 (Remainder of 2022)
• 2012-2015 Toyota Prius Plug-in Hybrid: $2,500 (Before 9-30-22)/ $1,250 (Remainder of 2022)
• 2023 Toyota bZ4X Plug-in Electric: $7,500 (Before 9-30-22)/ $3,750 (Remainder of 2022)

While Toyota models are no longer eligible for federal tax incentives, it’s still possible to get local rebates. Many states have offers through local electric companies. It’s wise to do some research about your region before choosing an EV or hybrid vehicle to drive.

(Sources: fueleconomy.gov, kbb.com)

Why Doesn’t the Toyota RAV4 Prime Qualify for a Federal Tax Credit?

The Inflation Reduction Act added a lot of regulations for vehicles to qualify for federal rebates.

Sadly, Toyota was disqualified from the federal tax credit because the RAV4 Prime isn’t assembled in North America.

For now, Toyota manufacturers the RAV4 Prime in Japan

The rules for vehicles that are assembled in North America have also changed. To get federal tax credits, the following conditions must be met.

• Income requirements: Single buyers can only make up to $150,000 per year, while joint taxpayers have a cap of $300,000.
• Vehicle price: To qualify, sedans must cost less than $55,000. SUVs, trucks and vans have to sell for less than $80,000. With a used vehicle, the price cap is $25,000, no matter what type of vehicle it is.
• Battery construction: The batteries must have a particular amount of materials sourced from North America or a free-trade partner with the United States. Plus, the vehicle must be assembled in North America. At this time, no electric vehicle meets these stringent guidelines.

The good news is that the vehicle sales cap put on manufacturers is going away. Chevy and Tesla both reached the previous 200,000 vehicle limit, which will be wiped clean. These automakers can once again qualify for rebates in 2023 if other conditions are met.

Additionally, in 2024, EV tax credits can be received directly from the dealership during the sale. No longer will customers need to wait for income tax returns to get the credit.

(Source)

Will the Toyota RAV4 Prime Qualify for a Federal Tax Credit in the Future?

Toyota could move final assembly to North America, but that takes a lot of money and tons of plant modifications. Even if Toyota took the time and money to make these changes, the other qualifications make it difficult to become eligible again. For that reason, it might not be worth the automaker’s time to make changes.

At this time, I have no reason to believe that RAV4 Prime assembly will be moved to North America. If something changes in the future, I will update you.

Is the RAV4 Prime Still Worth Buying?

Now that you can’t get the RAV4 Prime tax credit, you might wonder if it’s worth buying at all. Even without the RAV4 Prime rebate, the Prime may be worth it. The advanced technology and efficient power make it a leader in the segment.

>> Read my full article about whether or not the RAV4 Prime is worth it

Aside from that, it’s difficult to get a rebate on any vehicle right now. In my opinion, it’s not worth making a decision based on the rebate information. Instead, it’s best to pick a model that meets your needs and fits your budget.