California offers a state tax credit on top of the federal one, but the amount depends on your income and the vehicle you buy

California's state electric vehicle tax credit reduces your state income tax bill by up to $2,500 when you buy or lease a new battery electric vehicle (BEV) or plug-in hybrid (PHEV). Unlike the federal credit, which is based mainly on where the car was made, California's credit focuses on your household income and the vehicle's price. You claim it on your state tax return, not at the dealership.

The credit is not automatic. You must meet income limits, buy a vehicle that qualifies, and file Form 8910 with your California tax return. If you lease instead of buy, the rules are different — the leasing company typically claims the credit, which may lower your monthly payment.

Key Takeaways

  • California's state credit is worth up to $2,500 for buyers and up to $2,500 for lessees, but only if your household income is below the limit for your filing status.
  • The vehicle must be new, have a manufacturer's suggested retail price (MSRP) under $55,000, and be registered in California to count.
  • You claim the credit on your California tax return using Form 8910, not when you buy the car.
  • If you lease, the leasing company usually claims the credit and may pass the savings to you through a lower monthly payment.
  • The credit is separate from the federal tax credit, so you can claim both if you meet each program's rules.

Income limits that determine your credit amount

California sets income thresholds based on your filing status. If your modified adjusted gross income (MAGI) is below the limit, you get the full $2,500 credit. If your income is above the limit, you get nothing — there is no partial credit.

For the 2024 tax year, the income limits are $150,000 for single filers, $300,000 for married filing jointly, and $150,000 for head of household. These limits change each year, so check the California Franchise Tax Board website or your tax forms before filing. Your MAGI is usually your adjusted gross income (AGI) from your federal return, found on line 11 of Form 1040.

Vehicle price and type requirements

The car must be new (not used), have an MSRP of $55,000 or less, and be either a battery electric vehicle (BEV) or a plug-in hybrid (PHEV). The MSRP is the manufacturer's suggested retail price before any dealer markup, incentives, or rebates — it is the sticker price on the window.

Some vehicles that may have access to for the federal credit do not may have access to for California's state credit because of the price cap. For example, a Tesla Model S or Model X may exceed $55,000 MSRP and would not count for the state credit, even if it qualifies federally. Check the vehicle's MSRP before you buy to confirm it meets the limit.

How to claim the credit on your tax return

You claim California's electric vehicle credit using Form 8910, which you file with your state income tax return. The form asks for the vehicle identification number (VIN), the date you bought or leased the car, the MSRP, and your household income. You will need your purchase agreement or lease contract to fill it out.

File Form 8910 with your California Form 540 (or 540-NR if you are a nonresident) by the tax important date, usually April 15. If you bought the car late in the year, you can still claim the credit on that year's return — there is no requirement to buy by a certain date. If you sold or traded in the vehicle before the end of the tax year, you may still claim the credit for the year you owned it.

Leasing versus buying and how the credit works differently

If you buy the car, you claim the credit yourself on your tax return. If you lease, the leasing company (usually a bank or finance arm of the manufacturer) claims the credit. The leasing company may pass some or all of the savings to you through a lower monthly payment, but they are not required to.

When you lease, ask the dealer or leasing company upfront whether they plan to claim the credit and how it affects your payment. Some leasing companies build the credit into the deal from the start; others may not pass it through at all. Getting this in writing before you sign the lease helps you compare offers fairly.

How California's credit stacks with the federal credit

You can claim both the California state credit and the federal tax credit on the same vehicle if you meet each program's separate rules. The federal credit is based on the vehicle's battery size, where it was assembled, and the income of the buyer or lessee. California's credit is based on the vehicle's MSRP and your household income.

A vehicle might may have access to for the full federal credit but only the California state credit, or vice versa. For example, a car made outside North America might not may have access to for the federal credit but could still may have access to for California's. Check both programs' rules for the specific vehicle you are considering. The IRS website and California Franchise Tax Board website both have lists of may have access to vehicles.

What happens if you sell the car or move out of state

If you buy the car and claim the credit, then sell it within a few years, you do not have to repay the credit. California does not require you to hold the vehicle for a minimum time. However, if you move out of California before you file your return, you may not be able to claim the credit — the vehicle must be registered in California at the time you claim it.

If you lease the car and move out of state before the lease ends, the leasing company still claims the credit in the year you leased it. Your move does not affect their claim. If you buy a car in California, register it there, claim the credit, and then move, you keep the credit you already claimed — you do not repay it.

Frequently Asked Questions

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

No. California's state credit is only for new vehicles. The federal government has a separate used electric vehicle credit with different rules, but California does not offer a state credit for used cars.

What if the car's MSRP is exactly $55,000?

The limit is $55,000 or less, so a vehicle at exactly $55,000 MSRP qualifies. Check the manufacturer's official MSRP, not the dealer's asking price, which may be higher.

Do I have to register the car in California to claim the credit?

Yes. The vehicle must be registered in California when you claim the credit on your tax return. If you buy a car in California but register it in another state, you cannot claim California's state credit.

If I lease, will the leasing company definitely pass the credit to me?

Not necessarily. Some leasing companies build the credit into the monthly payment; others keep it. Ask the dealer or leasing company in writing before you sign whether they claim the credit and how it affects your payment.

Can I claim the credit if my income is slightly above the limit?

No. There is no partial credit. If your MAGI is above the limit for your filing status, you cannot claim any part of the $2,500 credit. The income limits are firm cutoffs, not thresholds that phase out gradually.