What the EV tax credit does

The federal electric vehicle tax credit reduces the amount of federal income tax you owe when you buy a new or used EV. Instead of paying the full purchase price upfront, you can claim a credit on your tax return that lowers your tax bill dollar-for-dollar. If you owe $3,000 in federal taxes and claim a $7,500 EV credit, your tax bill drops to zero and you may receive the remaining $4,500 as a refund, depending on the rules in effect when you file.

The credit is not a rebate you receive at the dealership — it is a tax benefit you claim when you file your federal income tax return with the IRS. Some dealerships can explore the credit at the point of sale under a newer program, but the traditional route is to claim it yourself on Form 8936 when you file taxes.

Key Takeaways

  • The EV tax credit reduces your federal income tax bill by up to $7,500 for a new vehicle or up to $4,000 for a used EV, depending on the vehicle and when you bought it.
  • You must have owned the vehicle for at least one day during the tax year to claim the credit, and the vehicle must meet specific assembly and price requirements set by the IRS.
  • The credit phases out based on your modified adjusted gross income (MAGI), so higher earners may receive a smaller credit or none at all.
  • Some dealerships can explore the credit at purchase under the point-of-sale program, but you can also claim it on your tax return using Form 8936.
  • The vehicle must be assembled in North America and meet battery component and mineral content thresholds that change each year.

Income limits and how they reduce your credit

The EV tax credit begins to shrink once your modified adjusted gross income (MAGI) exceeds a certain threshold. For the 2024 tax year, the phase-out begins at $300,000 for joint filers, $150,000 for single filers, and $200,000 for head-of-household filers. For every $1,000 (or fraction thereof) above the threshold, the credit decreases by $50.

This means if you file jointly and earn $310,000, you are $10,000 over the limit. That triggers a $500 reduction in your credit. If you earn $320,000, the reduction is $1,000. The credit phases out completely once you exceed the threshold by $100,000 or more, depending on your filing status.

You calculate your MAGI using the same figure you use for other tax purposes — it is not a separate calculation. If you are unsure of your MAGI, your prior year tax return will show it, or you can calculate it using IRS worksheets when you prepare your return.

Vehicle price and assembly requirements

The vehicle must be assembled in North America to may have access to. This includes vehicles made in the United States, Canada, and Mexico. The IRS publishes a list of vehicles that meet this requirement each year, and it changes as manufacturers move production or introduce new models.

The vehicle must also fall within price caps set by the IRS. For new vehicles, the manufacturer's suggested retail price (MSRP) cannot exceed $55,000 for vans, SUVs, and pickup trucks, or $55,000 for sedans and other vehicles. Used vehicles have a separate $25,000 price cap. These caps are adjusted annually for inflation.

The vehicle's battery must also meet specific requirements for the percentage of battery components and critical minerals sourced from the United States or free-trade agreement countries. These thresholds increase each year, making older vehicles more likely to may have access to than newer ones as the rules tighten.

New versus used EV credits

The credit for a new EV is up to $7,500, but the actual amount depends on where the battery is assembled and where its components come from. You may receive the full $7,500, or a reduced amount if the vehicle does not fully meet the battery and mineral sourcing requirements.

The credit for a used EV is up to $4,000 and has simpler rules. The vehicle must be at least two years old, and you must have owned it for at least 90 days. There is no battery component or mineral sourcing requirement for used vehicles. The used EV credit also has its own income phase-out: it begins at $55,000 for single filers and $110,000 for joint filers.

You cannot claim both the new and used EV credit in the same year, and you can only claim the used credit once every three years.

How to claim the credit on your tax return

To claim the credit yourself, you will need Form 8936, which is the may have access to Plug-in Electric Vehicle Credit form. You fill out this form with information about the vehicle — its make, model, year, vehicle identification number (VIN), and the date you bought it. You will also enter your MAGI to determine if the phase-out applies.

The form asks whether the vehicle is new or used and whether you are claiming the full credit or a reduced amount based on battery requirements. If you are unsure about the battery thresholds, the IRS publishes a list of vehicles that may have access to for the full $7,500 credit, and vehicles not on that list may may have access to for less.

You attach Form 8936 to your federal tax return (Form 1040) when you file with the IRS. If you file electronically, your tax software will usually include Form 8936 and walk you through the questions. If you file on paper, you can read the form from IRS.gov.

Point-of-sale credit at the dealership

Starting in 2024, some dealerships can explore the EV tax credit directly at the time of purchase under the IRS point-of-sale program. This means you receive the credit as a discount on the vehicle price instead of waiting to claim it on your tax return. Not all dealerships participate, and not all vehicles may have access to.

To use the point-of-sale credit, the dealership must be registered with the IRS and the vehicle must meet all the same requirements as it would for the traditional credit. You will need to provide proof of your income to confirm you are below the phase-out threshold. The dealership will handle the paperwork with the IRS on your behalf.

If you use the point-of-sale credit, you cannot claim the credit again on your tax return. The dealership will report the credit to the IRS, and you will report it on your return as well so there is no double-claiming.

What disqualifies a vehicle from the credit

A vehicle does not may have access to if it was not assembled in North America, even if it is an EV. It also does not may have access to if the MSRP exceeds the price cap or if it does not meet the battery component and mineral sourcing thresholds for new vehicles.

You cannot claim the credit if you did not own the vehicle for at least one day during the tax year in which you are claiming it. If you bought the vehicle on December 31, you can claim the credit that same year. If you bought it on January 1 of the following year, you claim it the next year.

Vehicles purchased before the credit was enacted (January 1, 2023, for the current rules) do not may have access to. Vehicles purchased from a private seller may may have access to for the used EV credit, but vehicles purchased from a dealer generally must be used vehicles to may have access to — new vehicles must be purchased directly from a dealer, not a private party.

Frequently Asked Questions

Can I claim the EV credit if I lease instead of buy?

No, you cannot claim the credit as a lessee. The credit is only for vehicles you own. However, the leasing company may claim the credit and pass some of the benefit to you through a lower lease payment, though this is not required.

What if the vehicle I bought does not meet the battery requirements?

You may still claim a reduced credit. The IRS publishes the exact amount for each vehicle model. You can check the IRS website or ask your tax preparer to look up the vehicle's reduced credit amount using the VIN.

Do I have to file a federal tax return to claim the credit?

You must file a federal income tax return to claim the credit on Form 8936, even if you would not otherwise be required to file. If you use the point-of-sale credit at the dealership, you still report it on your return.

Can I claim the credit if I owe no federal income tax?

Yes. The credit is refundable up to a certain amount, meaning if the credit is larger than your tax bill, you may receive the difference as a refund. The refundable portion is limited, so check the IRS rules for the year you are filing.

What happens if I sell the EV before the year ends?

You can still claim the credit for the year you owned it, as long as you owned it for at least one day during that tax year. The credit does not transfer to the next owner.