As of August 16, 2022, the Kia Niro electric vehicle (EV) and Niro plug-in hybrid electric vehicle (PHEV) are no longer eligible for federal tax credits. The new

Inflation Reduction Act

requires that final assembly takes place in North America for an EV to be eligible.

Since 2010, the federal government has provided tax incentives between $2,500 and $7,500 for people who buy new electric vehicles. Kia’s EVs and PHEVs have historically qualified, but they no longer will, since they are manufactured outside of North America.

Read on to learn about the positives and negatives of buying a Kia Niro without a tax credit, the state and local EV credits available, and alternative electric vehicles to consider.

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Are the Kia Niro EV and PHEV still eligible for a federal tax credit?

No, neither the Kia Niro EV or PHEV models are eligible for any federal tax credits from the IRS as of August 16, 2022.

Allow us to provide some further explanation. In 2020, the federal government started offering tax credits of up to $7,500 for individuals who purchased new electric vehicles. This was limited to a cap of 200,000 vehicles per auto manufacturer, which General Motors and Tesla both hit. So, their vehicles were no longer eligible for credits. Originally tax credits were based on the size of the vehicle’s battery, but new rules change this.

The new laws surrounding EVs and taxes will change again as of January 1, 2023, but that still doesn’t mean new

Tesla

and GM models will be eligible for tax credits (more on this below).

More relevant to the Kia Niro, new laws were added restricting vehicles that aren’t assembled in North America from being eligible. Kia’s vehicles are assembled in South Korea, meaning none of its EVs qualify.

What you should know about the new federal EV tax credit requirements

If you’re considering buying an EV, there are other new rules surrounding tax credits that you should be aware of, in addition to the North American assembly rule.

First of all, there are restrictions based on your total income. Single car buyers will only qualify if they make $150,000 or less per year. Joint income is capped at $300,000.

Other rules limit eligibility for pricier EV models. EV sedans must be under $55,000 to qualify for tax credits. Trucks, vans, and SUVs only qualify if they are under $80,000.

There are also new rules surrounding used vehicles. Used EVs put into service after December 31, 2023, will be offered a credit of up to $4,000. However, they cannot cost more than $25,000.

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The main thing limiting automakers is a new law surrounding battery construction requirements. Rather than basing credits on the size of the EV’s battery, the total $7,500 is divided into two separate qualifications:

A vehicle is eligible for the first $3,750 if at least 40% of its critical minerals (lithium, for example) are from either the U.S. or one of its

free trade partners

A vehicle is eligible for the other half if at least 50% of its components overall are sourced from either the U.S. or a free trade partner

These requirements will increase by 10% each year.

On top of this, starting in 2024 if any materials or components of an EV were manufactured by “foreign entities of concern,” such as China and Russia, they are ineligible. By the beginning of 2025, this will apply to any vehicle containing critical minerals extracted, processed, or recycled by one of these countries. This means that Tesla, GM,

Ford

, and company have some serious adjustments to make—none of their vehicles would be eligible if this rule was enacted immediately.

Since different rules are coming into effect at different times, it’s difficult to parse out which vehicles will still be eligible for tax credits. Luckily, the U.S. Department of Energy released

this list of electric vehicles assembled in North America

, along with notes regarding their eligibility for credits.

While the new rules might sound like bad news at first, bear in mind that the purpose is to effectively bring about significant, positive, long-term change. Automakers can no longer get away with relying on foreign markets for materials and marketing EVs just to wealthy buyers. If EVs are going to play a role in the fight against climate change, they must be accessible, affordable, and produced in a way that is ethical and sustainable.

Other electric vehicle incentives

While the new rules will make it fairly difficult to get a federal EV tax credit this year, there are still plenty of other incentives available for EVs and PHEVs. Many states and municipalities are offering their own rebates and tax credits to help cover EV ownership costs, such as reducing the burden of installing home charging systems.

For example,

California’s electric vehicle incentives

provide up to $7,000 in rebates.

Florida electric vehicle incentives

are managed by counties and municipalities, instead. Jacksonville residents, for instance, could qualify for up to $7,500 in regional EV tax rebates.

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Is the Kia Niro still worth buying?

Taking all of this into consideration, is it still worth it to buy a Kia Niro EV or PHEV? We say yes, but it depends on several factors.

First of all, it’s especially worth it if you live in an area heavily invested in EV infrastructure, particularly if you have access to local rebates and/or tax credits. Plus, the Kia Niro is cheaper than many of its competitors, even without the tax rebate, and it offers a highly competitive EV package in the compact SUV segment.

What makes the Kia Niro EV worth its $40,745 starting price? Great range, great standard features, and speedy charging.

On the other hand, the Niro PHEV starts at $35,035 and offers exceptional versatility, a fair 33-mile EV range, and a fantastic powertrain warranty.

An EV or PHEV can significantly reduce your fuel costs, especially when you consider the elevated costs per gallon that don’t seem to be going anywhere anytime soon.

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What to buy instead of a Kia Niro

There are plenty of other options when it comes to electric or plug-in hybrid vehicles. Models like the

Chevy Bolt

and

Nissan Leaf

still maintain their positions in their respective EV niches. But which vehicles are the best alternatives to a Kia Niro?

Unfortunately, it’s going to be tough to find a model that qualifies for federal tax credits, especially if you’re looking for an EV in the same price range as the Niro. There are some fair alternatives in the PHEV space if that’s more your tune, but if you had your sights set on a Niro EV, you’re probably not so excited about shelling out for a Rivian,

BMW

, or even a

Ford Mustang Mach-E

. Even with their tax credits, they’ll still cost more than a Niro EV.

So, what should you buy instead of a Kia Niro EV or PHEV? Here are some suggestions.

Best Kia Niro EV alternative: 2023 Chevrolet Bolt EUV

Starting price: $28,195

The Chevy Bolt EUV also isn’t eligible for a federal tax credit, but its starting price seriously undercuts that of the Kia Niro. Plus, its range is barely less than the 2023 Niro EV—the Niro gets 253 miles, while the Bolt EUV gets 247.

The Bolt EUV also gets slightly better fuel economy, rated for 115/125/104 MPGe combined/city/highway compared to the Niro’s 113/126/101 MPGe.

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Best Kia Niro PHEV alternative: 2022 Ford Escape PHEV

Starting price: $36,950

Possible tax credit: $6,843

Despite the new laws surrounding EV tax credits, the 2022 Ford Escape PHEV will still be eligible, meaning it’s still possible to own a great new PHEV for just over $30,000. The Ford Escape PHEV gets 37 miles of range and 40 mpg combined, meaning it generally offers better value than the Niro PHEV.

The Escape PHEV has been criticized for not offering an all-wheel-drive (AWD) option, but the Kia Niro also doesn’t offer AWD so you won’t be missing out!

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Best affordable EV: 2023 Nissan Leaf

Starting price: $29,135

Possible tax credit: $7,500

The Nissan Leaf is the definition of a no-nonsense electric vehicle. Sure, it may not have as much range—only 149 miles in base form—but do you really need more? And to be fair, its CHAdeMO connector isn’t as universally compatible as the connectors on other EVs. We’ll also admit, it’s not quite as versatile as the Niro’s SUV design.

But if you need a daily commuter that will save you a ton of money and keep your carbon footprint low, there’s no beating the Leaf. It was the world’s first mass-produced EV, and it in many ways remains the premier affordable, zero-emission car.

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