The Energy Consumer's Bulletin- a New England energy news blog

Heads up: the federal EV tax credit for toyota is about to phase out

Posted by Devan DiLibero on Wednesday, June 01, 2022 @ 09:26 AM

If you are looking to purchase an electric vehicle from Toyota, like the Toyota Prius Prime or the Toyota RAV4 Prime, you should know that the federal tax credit will soon start phasing out. The federal tax credit is capped at 200,000 electric vehicles (EVs) sold per manufacturer and Toyota is expected to reach this cap before June 2022. Here’s what this means if you’re in the market! 

What is the federal tax credit & its restrictions?   

The federal tax credit was put in place to foster EV adoption by incentivizing buyers.  The federal tax credit is up to $7,500, but the amount you can claim depends upon the battery size of the vehicle and your personal tax liability. Since the Toyota Prius Prime and RAV4 Prime have different battery sizes, they qualify for different federal tax credit amounts: 

Compare the Cars 


Electric Range 

Battery Capacity 

Federal Tax Credit 

Prius Prime 

25 miles 

8.8 kWh 


RAV4 Prime 

42 miles 

18.1 kWh 



If, as expected, Toyota sells its 200,000th EV by the end of June 2022, then the federal tax credit will still be available in-full until the end of October 2022 before it starts to phase out.  Here’s a schedule of how the phase-out would happen. 

Toyota Federal Tax Credit Phaseout 


July 1 Sept 30, 2022 

Oct 1 – Mar 31, 2023 

Apr 1 – Sept 30, 2023 

Oct 2023 -  

Prius Prime 





RAV4 Prime 





The Cars 

Let’s talk about the vehicles that helped Toyota hit the 200,000 car cap.  

In 2012, Toyota came out with its first plug-in hybrid option, the Prius plug-in hybrid, which is now called the Prius Prime. The Prius Prime makes up the majority of the nearly 200,000 units sold. This current model of this popular hatchback has 25 miles of electric range and is a popular option for first-time electric vehicle buyers. The Prius Prime is currently eligible for $4,502 of the federal tax credit.

The Toyota RAV4 Prime came out in 2020 and was immediately popular. It has an electric range of 42 miles and is an SUV – two great things for the PHEV market. Like all cars, it has experienced inventory issues due to the chip shortage and demand is exceeding supply. The RAV4 Prime is currently eligible for the full $7,500 tax incentive.

The timing of this impending phase-out is truly unfortunate since Toyota has finally released its first battery-electric vehicle (BEV) in the United States called the bZ4X (MSRP $42,000). The bZ4X has an all-electric range of up to 252 miles and comes in either FWD or AWD. This car is not yet at the dealerships but is available for order on the manufacturer’s website.

bZ4XToyota bZ4X

In short... 

If you want a RAV4 Prime, Prius Prime, or the new bZ4x and are counting on the federal tax credit, make sure you act before the end of September 2022 to get the maximum federal incentive.

Tags: Electric vehicles/Transportation

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