What tax money you can get back when you buy an electric vehicle

The federal government offers a tax credit of up to $7,500 when you buy a new electric vehicle, and some states add their own credits on top. The credit reduces your federal income tax dollar-for-dollar — if you owe $5,000 in taxes and claim a $7,500 credit, you owe nothing and may get a $2,500 refund. You claim it on your tax return the year you buy the car, and you must meet income limits, vehicle price caps, and domestic content rules to receive the full amount.

Many states run separate programs that work differently: some give you a rebate at the time of purchase instead of waiting until tax season, others cap the credit lower, and a few offer nothing. The credit you receive depends on which vehicle you buy, where you live, how much you earn, and whether you buy new or used.

Key Takeaways

  • The federal tax credit is up to $7,500 for new vehicles and up to $4,000 for used vehicles, but income limits and vehicle price caps can reduce or eliminate the credit.
  • You must claim the federal credit on your tax return; it does not happen automatically when you buy the car.
  • Some states offer additional credits or rebates that stack on top of the federal credit, while others offer nothing.
  • The vehicle's final assembly location, battery component sourcing, and mineral content rules determine whether you may have access to for the full credit or a partial one.
  • Used electric vehicles have different rules, lower credit amounts, and a three-year ownership requirement for the previous owner.

Federal tax credit amounts and income limits for new vehicles

The federal credit for a new electric vehicle starts at $7,500, but your income determines whether you receive the full amount, a reduced amount, or nothing. For 2024, the income limits are $300,000 for joint filers, $150,000 for single filers, and $200,000 for heads of household. If your income exceeds these limits, you receive no credit.

If your income is below the limit, you still may not receive the full $7,500. The credit phases down in $50 increments for every $1,000 you earn above a lower threshold: $260,000 for joint filers, $130,000 for single filers, and $170,000 for heads of household. A joint filer earning $270,000 would lose $500 of the credit, for example.

The vehicle's manufacturer's suggested retail price (MSRP) also caps the credit. 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 prices, you receive no credit, regardless of income.

Federal credit rules for used electric vehicles

Used electric vehicles carry a maximum credit of $4,000, with different income limits and purchase price caps. The income thresholds are $150,000 for joint filers, $75,000 for single filers, and $100,000 for heads of household — half the new-vehicle limits. The vehicle's sale price cannot exceed $25,000.

The previous owner must have owned the vehicle for at least three years before you buy it, and the vehicle itself must be at least two years old. You cannot claim the used credit if you are related to the seller or if the seller is a dealer selling inventory — the sale must be between private parties or from a dealer selling a trade-in they took in.

Used vehicle credits also phase down based on income, in $50 increments per $1,000 earned above $110,000 for joint filers, $55,000 for single filers, and $70,000 for heads of household.

Domestic content and battery rules that reduce your credit

The vehicle must meet rules about where it was assembled and where its battery components come from. The final assembly must occur in North America — Canada, Mexico, or the United States. If a vehicle is assembled elsewhere, you receive no credit.

Battery component and mineral content rules are stricter and change each year. For 2024, the battery must contain a minimum percentage of critical minerals (like lithium, cobalt, and nickel) sourced from the United States or countries with which the U.S. has a free-trade agreement. The battery components themselves must be manufactured or assembled in North America. If either rule is not met, the credit drops by $3,750.

These rules eliminate the full credit for many vehicles, even if they are otherwise may be able to access. A vehicle that fails the battery sourcing requirement but meets the assembly requirement receives $3,750 instead of $7,500. A vehicle that fails both receives nothing.

State tax credits and rebates that stack with federal credit

California, Colorado, Connecticut, Delaware, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Nevada, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Virginia, and Washington all offer state-level credits or rebates for electric vehicle purchases. The amounts, rules, and mechanics vary widely.

California's Clean Vehicle Rebate Program offers up to $2,000 for new vehicles and up to $1,500 for used vehicles, with income limits lower than the federal program. Colorado offers up to $5,000 for new vehicles. New York offers up to $2,000 for new vehicles and up to $1,000 for used vehicles. Some states, like Oregon and Vermont, offer rebates at the time of purchase rather than as a tax credit you claim later.

A few states cap the credit based on the vehicle's price or the buyer's income differently than the federal program does. Check your state's revenue or environmental agency website to learn the current rules, as they change year to year and some programs have limited funding that runs out.

How to claim the federal credit on your tax return

You claim the federal credit using IRS Form 8936, which you file with your annual tax return. The form asks for the vehicle's identification number (VIN), the date you bought it, the manufacturer, and the vehicle's MSRP. You will need the dealer's invoice or window sticker to confirm the MSRP.

If you bought the vehicle in 2024, you claim the credit on your 2024 tax return, which you file in early 2025. You cannot claim the credit in a different year. If you owe less federal income tax than the credit amount, the excess may be refunded to you, but only up to $3,750 for new vehicles and $2,000 for used vehicles in any single year.

Some dealers now offer point-of-sale credits, meaning you can transfer your credit to the dealer and reduce your purchase price when ready instead of waiting until tax season. This option is available only at participating dealers and only for new vehicles. You still must meet all income and vehicle requirements.

What disqualifies you from the federal credit

You cannot claim the credit if you did not owe federal income tax in the year you bought the vehicle. If you had no tax liability, you receive no credit and no refund, even if you are otherwise may be able to access. This affects many lower-income buyers who do not owe federal tax.

You also cannot claim the credit if you are not a U.S. citizen or resident alien, or if the vehicle was not for your personal use. Commercial vehicles, fleet purchases, and vehicles used primarily for business do not may have access to, though there are separate commercial credits available.

If you previously claimed a credit for the same vehicle or if you bought the vehicle from a related party (spouse, parent, sibling, or child), you are ineligible. You also cannot claim the credit if the vehicle was assembled outside North America, regardless of other factors.

Frequently Asked Questions

Can I get the credit if I lease instead of buy?

No. The federal tax credit applies only to purchases. Leases have a separate $7,500 credit that the leasing company claims, not you. Some state programs do cover leases, so check your state's rules.

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

You receive no federal credit. Some state programs have higher price caps, so you may still receive a state credit. Check your state's program before ruling out the vehicle.

Do I have to file taxes to claim the credit?

Yes. You must file a federal tax return to claim the credit, even if you normally would not owe taxes. If you had no income tax liability, you cannot use the credit.

Can I claim the credit if I bought the car last year?

You claim the credit in the tax year you bought the vehicle. If you bought it in 2023, you claim it on your 2023 return filed in early 2024. You cannot claim it in a later year.

Does the credit explore to electric motorcycles or scooters?

No. The federal credit applies only to vehicles with four or more wheels. Two- and three-wheeled electric vehicles do not may have access to, though some states offer separate credits for them.