2024 EV Tax Credit: What You Need to Know
A new electric vehicle (EV) can help you reduce your carbon footprint and access a tax credit of up to $7,500. As of 2024, the federal government expanded the tax break to allow you to choose between applying the credit to your taxes or getting a discount on your EV purchase.
However, only certain vehicles are eligible for the EV tax credit and your shopping preferences may be more limited than in previous years due to tighter restrictions, especially around battery manufacturing.
What is the EV tax credit?
The EV tax credit was part of the 2022 Inflation Reduction Act. This nonrefundable tax credit of up to $7,500 is available to taxpayers who purchase a new, qualifying EV or “clean” vehicle between 2023 and 2032. Used clean vehicles can qualify for a tax credit of up to $4,000.
The federal EV tax credit applies to new, qualifying plug-in EVs or fuel cell electric vehicles (FCVs). Vehicles obtained on or after April 18, 2023, must meet critical mineral and battery requirements to get the full $7,500 tax credit.
The critical minerals and battery requirements each come with a $3,750 tax credit. A vehicle may be eligible for either credit or both, for a maximum of $7,500.
What’s new in 2024: The Internal Revenue Service (IRS) updated the regulations on new and used plug-in EVs and FCVs. This updated guidance allows dealers to access your available tax credit and knock that amount off your vehicle’s sale price. This new ability turns the credit into a discount on the EV itself.
How does the EV tax credit work?
You can choose to transfer your EV tax credit to your qualified dealer when you buy the car or claim the EV tax credit on your taxes instead. For example, if you owe $10,000 in taxes and you qualify for the full $7,500 EV credit, your total tax liability will be $2,500.
But you can only claim up to the amount of taxes you owe — the government won’t give you a refund in excess of what you owe. If you buy a qualifying car in 2023, you’ll claim it when doing your taxes in 2024.
These rules are in effect for vehicles purchased from 2023 to 2032.
The revised IRS rules helped clear up confusion about which vehicles qualify and which vehicles are classified as cars or SUVs. Under the new guidelines, some vehicles that once qualified for credits are no longer eligible, like some Tesla models and the Ford Mustang Mach-E.
The tax credit applies to “clean vehicles,” so certain hydrogen fuel cell vehicles and plug-in hybrids may qualify as well. The vehicle must go through final assembly in North America, and vehicles delivered on or after the April 18, 2023 deadline must meet battery and critical mineral sourcing requirements. Keep in mind, this means when you take delivery of the car, not when you ordered or made a deposit on the vehicle.
Clean vehicles eligible for the EV tax credit come with a price cap. The limitations are based on the manufacturer’s suggested retail price (MSRP), not the actual price you paid for the vehicle. Additional costs like sales tax, fees and negative equity don’t factor into the MSRP, and dealer incentive pricing won’t affect it either.
- $80,000 and under for vans, sport utility vehicles and pickup trucks
- $55,000 and under for other vehicles, including sedans and passenger cars
New EV requirements
To qualify for the federal tax credit, a new EV must:
- Not be purchased for resale
- Be used primarily in the U.S.
- Be built by a qualified manufacturer
- Have a gross vehicle weight rating of less than 14,000 pounds
- Have a battery capacity of seven-kilowatt hours (kWh) or more
- Be capable of recharging from an external source of electricity
- Have final assembly in North America
For a taxpayer to claim the credit, the seller must provide a report containing taxpayer and vehicle information to both the consumer and the IRS.
Used EV requirements
You can claim the tax credit credit for a used EV or FCV, though it’s limited to 30% of the sale price, up to a maximum of $4,000. You’ll also have to buy the vehicle from a licensed dealer.
To qualify, a used EV must:
- Have a sale price of $25,000 or less
- Have a model year at least two years earlier than the calendar year of purchase (for example, a vehicle purchased in 2024 would need a model year of 2022 or older)
- Not have already been transferred after Aug. 16, 2022 to a qualified buyer
- Have a gross vehicle weight rating of less than 14,000 pounds
- Be an eligible FCV or plug-in EV with a battery capacity of least 7 kilowatt hours
- Be for use primarily in the United States
Income eligibility requirements
In addition to the vehicle, car buyers must also qualify for the federal EV tax credit. To take full advantage, your modified adjusted gross income (AGI) must be below the following limits:
|Married couples filing jointly
|Head of household
For both new and used EVs, you have the option to use the modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. If your modified AGI is below the threshold in either of the two years, you can claim the credit.
The credit is nonrefundable, so you can’t use the credit to get back more than you owe in taxes. You also can’t apply any excess credit to future tax years.
Which vehicles qualify for the 2023 tax credit?
Check with your dealer before you buy to make sure you understand how much of the credit a vehicle may qualify for based on the critical mineral, battery component and final assembly requirements. Depending on when a vehicle is placed in service, it may qualify for a smaller credit amount — or not qualify at all.
Eligibility for the federal EV tax credit depends on several factors, including the vehicle’s MSRP, its final assembly location and your modified AGI.
To qualify, an EV or FCV must be at least two years old with a sales price of $25,000 or lower. The car must be purchased from a dealer, and the dealer must provide the required EV information to you and the IRS.
EV charger tax credit
If you buy an EV, you can also receive a tax credit for installing a charging station at your primary residence. For equipment purchased between 2023 and 2032, you may be able to receive a tax credit of $1,000 or 30% of the cost, whichever is smaller.
The charging station must:
- Be installed during the tax year
- Have original use that began with the taxpayer
- Be used primarily in the U.S. and U.S. territories
- Be installed at your main home if it’s not located at a business or investment use property
Qualifications also rely on the demographics of the area where the property is located, based on census data. The property must be located in an eligible census tract, meaning it is not located in an urban area and it is in a low-income community.
Use IRS form 8911 to claim the Alternative Fuel Vehicle Refueling Property Credit.
How to claim the EV tax credit
If you want to use your EV tax credit as a discount toward your new clean vehicle, you’ll need to transfer thetax credit to any dealer registered with the IRS. The dealer can reduce the cost of the vehicle by the amount of the credit, which lowers the amount you’ll pay for the car.
If you choose not to go that route, you can file your Qualified Plug-In Electric Drive Motor Vehicle Credit, by using IRS form 8936. For vehicles delivered in 2023, you claim the tax credit as part of your tax return, so you’ll have to wait until tax time in 2024 to get the benefit.
How to get the EV tax credit on cars bought before April 18, 2023
If you bought a clean vehicle before April 18, 2023, the critical minerals and battery sourcing requirements won’t apply. Qualified new cars and light truck EVs are eligible for a maximum credit of $7,500. The credit includes:
- $2,917 for a vehicle with a battery capacity of at least five kWh
- $417 for each additional kWh of capacity
The vehicle must also:
- Have an external charging source
- Have a gross vehicle weight rating under 14,000 pounds
- Be made by a vehicle manufacturer that hasn’t sold more than 200,000 EVs in the U.S.
If you took delivery of an EV between Aug. 17, 2022, and Dec. 31, 2022, it also must have gone through final assembly in North America to qualify. Be sure to check the specific country of origin for your vehicle, as vehicles may be assembled in multiple locations.