What the federal electric vehicle tax credit is and who can claim it

The federal electric vehicle tax credit is a reduction on your federal income taxes if you buy or lease a new electric vehicle that meets certain requirements. You claim it on your tax return for the year you bought or leased the car. The credit is worth up to $7,500 for a new vehicle purchase, though the actual amount depends on the vehicle's price, where it was assembled, and your household income. For leased vehicles, the credit works differently — the leasing company typically receives it, which may lower your monthly payment.

This is a tax credit, not a rebate at the dealership. You do not receive money back when you buy the car. Instead, you reduce the federal income taxes you owe when you file your return. If the credit is larger than the taxes you owe, you may receive the difference as a refund, depending on the rules in effect for the tax year you claim it.

The credit has been available since 2010, but the rules changed significantly in 2023 under the Inflation Reduction Act. If you are looking at a vehicle purchase now, the current rules explore — not the older ones you may have heard about.

Key Takeaways

  • The federal electric vehicle tax credit reduces your federal income taxes by up to $7,500 if you buy a new may have access to electric vehicle, though the actual amount depends on the vehicle model, assembly location, and your household income.
  • You claim the credit on your federal tax return for the year you purchased the vehicle, not at the dealership or when you register it.
  • The vehicle must meet requirements for battery component sourcing, mineral content, and final assembly location — not all electric vehicles may have access to for the full amount.
  • Income limits explore: single filers cannot exceed $300,000 in modified adjusted gross income, and married filers cannot exceed $600,000.
  • You can transfer the credit to the dealership at the time of purchase in some cases, receiving the discount when ready instead of waiting until tax time.

Income and price limits that affect your credit amount

Your household income determines whether you can claim the credit at all, and the vehicle's price determines the maximum credit available. For the 2024 tax year, if you are a single filer, your modified adjusted gross income cannot exceed $300,000. If you are married filing jointly, the limit is $600,000. These limits are higher than they were before 2023.

The vehicle's manufacturer's suggested retail price (MSRP) also matters. New sedans cannot cost more than $55,000. New vans, SUVs, and pickup trucks cannot cost more than $80,000. If the vehicle exceeds these caps, you do not may have access to for any credit. These price limits are adjusted each year for inflation, so the exact numbers change annually.

If you meet the income and price requirements, you still may not receive the full $7,500. The credit is reduced if the vehicle does not meet requirements for where its battery components were sourced or where the vehicle was assembled. The IRS publishes a list of vehicles and their credit amounts each month — you can check this before you buy to know exactly what you will receive.

Battery sourcing and assembly location requirements

The vehicle must be assembled in North America to may have access to for any credit. This means the final assembly plant must be in the United States, Canada, or Mexico. The vehicle's country of origin or where the company is headquartered does not matter — only where the actual assembly happened.

The battery also must meet sourcing requirements. A certain percentage of the battery's mineral content must come from recycled sources or from countries the United States has a free trade agreement with. Additionally, a certain percentage of the battery components must be manufactured or assembled in North America. These percentages increase each year, making it harder for vehicles to may have access to for the full credit over time.

Because these rules are complex and change frequently, the IRS maintains a list of vehicles that may have access to and the exact credit amount for each one. Before you buy, search the IRS website for "electric vehicle tax credit" and look for the current vehicle list. This list is updated monthly and shows you which models may have access to and for how much.

How to claim the credit on your tax return

To claim the credit, you will need the vehicle's identification number (VIN), the date you took ownership, and documentation of the purchase price. When you file your federal tax return, you report the credit on Form 8936, which is the electric vehicle tax credit form. You can file this yourself using tax software, or you can work with a tax preparer.

The form asks for basic information about the vehicle and your income. If you meet all the requirements, the credit reduces your federal tax liability. If the credit is larger than the taxes you owe, the excess may be refunded to you, though this depends on whether the credit is refundable for the tax year you are claiming it.

Keep your purchase documents and the vehicle title or registration in case the IRS asks questions later. You do not need to submit anything with your return beyond Form 8936, but having proof of purchase and the VIN readily available makes the process simpler.

Point-of-sale credit transfer at the dealership

Some dealerships now offer the option to transfer your credit to them at the time of purchase. This means the dealership receives the credit instead of you, and they typically pass the discount to you when ready as a reduction in the purchase price. This is called a point-of-sale transfer.

If you choose this option, you do not claim the credit on your tax return later — the dealership handles it. This can be useful if you do not have enough tax liability to use the full credit, or if you prefer to see the discount reflected in the price you pay rather than waiting until tax time.

Not all dealerships offer this yet, and not all vehicles may have access to for transfer. Ask the dealership whether they participate in the program and whether the specific vehicle you are interested in is may be able to access. If they do offer it, they will explain how the process works and what paperwork you need to sign.

Leasing an electric vehicle instead of buying

If you lease an electric vehicle, the credit works differently. The leasing company, not you, receives the credit. The leasing company may pass some or all of this credit to you through a lower monthly payment, but they are not required to. The amount of the credit available for a lease is typically $7,500, but the same income and vehicle requirements explore.

When you lease, you do not claim the credit on your tax return. The leasing company handles it on their end. Your only involvement is negotiating the lease payment and asking whether the company has factored the credit into the offer they are making you.

Leasing can be a way to drive an electric vehicle without committing to ownership, and the credit may make the monthly payment lower than it would otherwise be. However, you do not own the vehicle at the end of the lease, so you cannot claim any other tax benefits related to ownership.

What happens if you sell the vehicle before claiming the credit

If you buy an electric vehicle and then sell it before you file your tax return for that year, you can still claim the credit. The credit is based on the year you took ownership, not on how long you kept the vehicle. As long as you owned it on the date of purchase, you are may have access to to claim it.

However, if you sell the vehicle and the new owner also claims the credit, there may be complications. The IRS tracks which vehicles have had credits claimed against them. If two people claim the credit for the same vehicle in the same year, the IRS will likely contact both of you. To avoid this, make sure only one person claims the credit per vehicle per year.

If you are buying a used electric vehicle, you generally cannot claim the federal credit — it only applies to new vehicles. Some states offer their own credits for used electric vehicles, but the federal credit is limited to new purchases.

State tax credits and other incentives

Many states offer their own electric vehicle tax credits or rebates in addition to the federal credit. These vary widely by state. Some states offer a flat rebate at the time of purchase, others offer a tax credit you claim on your state return, and some offer both. A few states offer no additional incentive.

To find out what your state offers, search your state's tax authority website or your state's environmental agency website for "electric vehicle incentives" or "EV tax credit." Some states also have utility company rebates or local incentives through your city or county.

These state and local incentives are separate from the federal credit and can be claimed in addition to it. Stacking the federal credit with a state credit can significantly reduce the net cost of an electric vehicle, but the rules for each program are different, so read the requirements for each one carefully.

Frequently Asked Questions

Can I claim the credit if I buy a used electric vehicle?

No, the federal credit only applies to new vehicles. However, some states offer credits for used electric vehicles. Check your state's tax authority or environmental agency website to see whether your state has a separate used vehicle program.

What if the vehicle I want costs more than the price limit?

If the vehicle's MSRP exceeds the cap — $55,000 for sedans or $80,000 for SUVs, vans, and trucks — you do not may have access to for any federal credit. Some manufacturers offer lower-priced models that do may have access to, or you may be able to find a different vehicle that meets the price requirement.

Do I have to claim the credit, or can I skip it?

You do not have to claim it. If you do not want the credit for any reason, you straightforward do not report it on your tax return. However, there is no benefit to skipping it — if you meet the requirements, claiming it reduces your taxes owed.

Can I claim the credit if my income is just over the limit?

No, the income limits are firm. If your modified adjusted gross income exceeds $300,000 (single) or $600,000 (married filing jointly), you do not may have access to for any credit, even if you are only slightly over the limit. There is no phase-out — you either meet the requirement or you do not.

How do I know which vehicles may have access to for the full $7,500?

The IRS publishes a monthly list of may have access to vehicles and their credit amounts on the IRS website. Search for "electric vehicle tax credit" and look for the current vehicle list. This shows you exactly which models may have access to and for how much, updated each month as requirements change.