California offers a state tax credit for electric vehicle purchases, separate from the federal credit

California's state EV tax credit reduces your state income tax bill when you buy or lease a new electric vehicle. Unlike the federal credit, which is a federal tax deduction, California's credit is a tax credit—meaning it subtracts directly from what you owe the state. The amount varies depending on the vehicle type and your income level, and not all EVs may have access to. The credit is administered through the California Department of Tax and Fee Administration (CDTFA), and you claim it when you file your state income tax return.

This credit exists alongside the federal EV tax credit, so you may be able to use both. However, the rules for each are different, and claiming one does not automatically mean you get the other. Understanding which credit applies to your situation requires knowing the vehicle's price, your household income, and whether the vehicle meets California's specific requirements.

Key Takeaways

  • California's EV tax credit is claimed on your state tax return and reduces your California income tax bill directly, separate from any federal credit you may receive.
  • The credit amount depends on the vehicle's price and your household income, with income limits that phase out the credit for higher earners.
  • Not all electric vehicles may have access to—the vehicle must meet California's price cap and other requirements, which change year to year.
  • You claim the credit when you file your California tax return, not at the dealership, so you need to keep your purchase documents and vehicle registration.
  • Leased vehicles may have different rules than purchased vehicles, and some lease agreements may not allow you to claim the credit.

Income limits and credit amounts for 2024

California's EV tax credit phases out based on your household income. For the 2024 tax year, the credit is available to single filers with income up to $150,000 and joint filers with income up to $300,000. If your income exceeds these thresholds, you do not receive the credit. The credit amount itself ranges from $2,000 to $8,000, depending on the vehicle's price and powertrain type.

Vehicles priced under $55,000 (new) or $25,000 (used) may may have access to for the full credit amount. Vehicles between $55,000 and $75,000 (new) or $25,000 and $35,000 (used) receive a reduced credit. Vehicles above these price caps do not may have access to. These price thresholds are set by California law and can change, so checking the current year's rules before purchase matters if you are near the cutoff.

The credit is nonrefundable, meaning it can only reduce your tax bill to zero—it cannot result in a refund. If the credit is larger than the tax you owe, you lose the unused portion. Some taxpayers may be able to carry the unused credit forward to future years, but this depends on your specific tax situation and should be discussed with a tax professional.

Which vehicles may have access to and which do not

California maintains a list of vehicles that meet the state's EV tax credit requirements. The vehicle must be a new or used battery electric vehicle (BEV) or plug-in hybrid electric vehicle (PHEV). The vehicle must also meet California's emissions standards and be registered in California. Vehicles that do not meet these requirements—including some imported EVs or vehicles registered out of state—are not may be able to access.

Price is a major factor. New battery electric vehicles must be priced under $55,000 to receive the full credit; new PHEVs must be under $45,000. Used vehicles have separate price caps: under $25,000 for used BEVs and under $20,000 for used PHEVs. A vehicle that exceeds these caps receives no credit, even if it is otherwise may be able to access. Luxury brands and high-performance models often fall outside these price ranges.

The California Air Resources Board (CARB) publishes the official list of vehicles that meet the requirements. Before you purchase, checking this list ensures the vehicle you are considering actually qualifies. Dealerships may not always have current information, so verifying directly with CARB or the CDTFA website is the safest approach.

How to claim the credit on your tax return

You claim California's EV tax credit by filing Form 8396-CA (California Electric Vehicle Rebate) with your state income tax return. You cannot claim the credit at the dealership or at the time of purchase—it is claimed only when you file taxes. This means you need to keep your vehicle purchase documents, proof of registration, and the vehicle identification number (VIN) available when you prepare your return.

The form requires basic information: your name and Social Security number, the vehicle's VIN, the purchase date, the vehicle's price, and your household income. You will also need to confirm that the vehicle meets California's requirements. If you are unsure whether your vehicle qualifies, the CDTFA website has a searchable database of may be able to access vehicles organized by make and model.

If you use a tax preparer or tax software, mention the EV purchase when you provide your documents. Many tax software packages now include prompts for the EV credit, but not all do. If your software does not ask about it, you may need to file Form 8396-CA separately or work with a tax professional to may support it is included in your return.

Leased vehicles and special situations

If you lease an electric vehicle, the rules are different. In some cases, the leasing company (not you) may claim the credit, which can result in a lower monthly lease payment. In other cases, you may be able to claim the credit yourself. The answer depends on the lease agreement and the leasing company's tax situation. Before signing a lease, ask the dealership or leasing company whether the EV tax credit is factored into your monthly payment or whether you will claim it on your taxes.

If you purchase a used EV, you can claim the credit if the vehicle meets the price and may be able to access requirements. However, used vehicles have stricter income limits: the credit phases out at $130,000 for single filers and $260,000 for joint filers. This is lower than the new vehicle threshold, so some households that may have access to for a new EV credit may not may have access to for a used EV credit.

If you trade in a vehicle when you purchase an EV, the trade-in value does not reduce the purchase price for credit purposes. The credit is based on the actual purchase price of the new vehicle, not the net amount you pay after the trade-in.

How California's credit differs from the federal credit

The federal EV tax credit is a federal income tax credit that can be as high as $7,500 for new vehicles and $4,000 for used vehicles. California's credit is separate and can be used in addition to the federal credit. However, the rules for each are different, and a vehicle that qualifies for one may not may have access to for the other.

The federal credit has different income limits, price caps, and vehicle requirements than California's credit. For example, the federal credit has a manufacturer assembly requirement (the vehicle must be assembled in North America) and battery component sourcing rules that California's credit does not have. Conversely, California's credit does not have these requirements but does have its own price caps and emissions standards.

If you are buying an EV, you may be able to claim both credits on your taxes. However, you cannot claim the same credit twice, and some vehicles may may have access to for one but not the other. Working through both sets of requirements or consulting a tax professional can help you understand the total tax benefit available to you.

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

Once you claim the EV tax credit, it is yours—selling the vehicle does not require you to repay it. The credit is tied to your tax return for the year you purchased the vehicle, not to the vehicle itself. If you sell the vehicle a year later, the buyer cannot claim the credit again.

If you move out of California after purchasing an EV but before claiming the credit, you can still claim it on your California tax return for the year of purchase if you were a California resident at the time of purchase. However, if you move out of state and become a resident of another state, your tax situation becomes more complex. Some states have their own EV credits, and you may not be able to claim both. Consulting a tax professional in your new state is advisable if this applies to you.

Frequently Asked Questions

Can I claim both the California state credit and the federal credit on the same vehicle?

Yes, you can claim both if the vehicle meets the requirements for each program. However, the rules for each are different, so a vehicle that qualifies for one may not may have access to for the other. Check both the California CDTFA website and the federal IRS website to confirm your vehicle meets both sets of requirements before assuming you will receive both credits.

What if my household income is above the limit?

If your income exceeds California's threshold, you do not receive the credit. The income limits are $150,000 for single filers and $300,000 for joint filers for new vehicles. Used vehicles have lower limits: $130,000 and $260,000 respectively. There is no partial credit if you are slightly over the limit.

Do I need to do anything at the dealership to claim the credit later?

No. The dealership does not process the credit. You claim it on your California tax return by filing Form 8396-CA. Keep your purchase documents, vehicle registration, and VIN available when you file your taxes. The dealership should provide you with a receipt showing the purchase price and vehicle details.

Can I claim the credit if I buy a used EV from a private seller?

Yes, if the vehicle meets California's requirements for used EVs. The vehicle must be priced under $25,000 (for BEVs) or $20,000 (for PHEVs), and you must be able to register it in California. You will need proof of purchase and the vehicle's registration. A bill of sale from the private seller serves as proof of purchase.

What if the vehicle I want to buy is above the price cap?

If the vehicle exceeds California's price cap, it does not may have access to for the state credit. The cap for new battery electric vehicles is $55,000. Some luxury and high-performance EVs exceed this price, making them ineligible. You may still be able to claim the federal credit if the vehicle meets federal requirements, but California's state credit would not be available.