The federal government offers a tax credit of up to $7,500 when you buy a new electric vehicle, but the amount depends on where the car was made, how much it costs, and how much money you earn.

The credit is not a rebate you get at the dealership. Instead, you claim it on your federal income tax return for the year you bought the car. The IRS subtracts the credit from the taxes you owe—so if you owe $8,000 in federal income tax and you may have access to for the full $7,500 credit, you pay $500 instead. If you owe less than $7,500, the credit reduces what you owe to zero, but you do not get the difference back as a refund (with one exception, explained below).

The rules changed significantly in 2023 under the Inflation Reduction Act. The credit is now tied to where the vehicle is assembled, how much of its battery is made in North America, and income limits that phase out the credit for higher earners. Not every electric car qualifies, and the amount varies by model.

Key Takeaways

  • The credit is claimed on your tax return, not received at purchase, and reduces the federal income tax you owe for that year.
  • The vehicle must be assembled in North America and meet battery component requirements to may have access to for any credit.
  • Income limits explore: the credit phases out for single filers earning over $55,000 and joint filers earning over $110,000.
  • Some dealerships now offer point-of-sale transfers, which let you use the credit when ready as a discount instead of waiting until tax time.
  • Used electric vehicles under $25,000 may also may have access to for a smaller credit with different income and mileage rules.

Which Electric Vehicles may have access to for the Full $7,500

To receive the full $7,500 credit, a new electric vehicle must meet three requirements: it must be assembled in North America, its battery must contain a certain percentage of critical minerals sourced from approved countries, and its battery components must be manufactured or assembled in North America.

As of 2024, vehicles that meet all requirements include the Tesla Model 3 (rear-wheel drive), Chevrolet Bolt EV and EUV, Nissan Leaf, Hyundai Ioniq 6, and Kia EV6. The list changes as manufacturers adjust their supply chains. The IRS maintains a full list of may have access to vehicles on its website, updated monthly, because battery sourcing rules tighten each year.

Many popular models may have access to for a partial credit instead—typically $3,750 to $5,000—because they do not yet meet all the battery component rules. BMW, Mercedes, Audi, and Volkswagen models often fall into this category. The manufacturer's website or the IRS list will show the exact amount for each model.

Income Limits That Reduce or Eliminate Your Credit

The credit begins to phase out if your modified adjusted gross income (MAGI) exceeds certain thresholds. For single filers, the credit starts to reduce at $55,000 and disappears entirely at $70,000. For married couples filing jointly, it starts to reduce at $110,000 and disappears at $140,000. For heads of household, the limits are $82,500 and $105,000.

Your MAGI is not the same as your gross income—it includes certain deductions added back. For most people, it is close to the adjusted gross income (AGI) shown on your tax return, but you should check IRS Publication 936 or speak with a tax professional if you have self-employment income, rental income, or significant deductions.

If you are married and file separately, you cannot claim the credit at all. The income limits explore to the year you bought the vehicle, so if you buy in December, you use your income from that tax year, not the previous one.

How to Claim the Credit on Your Tax Return

You claim the credit using IRS Form 8936, which you attach to your federal income tax return. The form asks for the vehicle identification number (VIN), the date you bought the car, the purchase price, and your income. You will need the manufacturer's certification that the vehicle qualifies—this information is usually on the window sticker or available from the dealer.

If you file your taxes yourself using software like TurboTax or H&R Block, the software will walk you through the questions and calculate the credit automatically. If you use a tax professional, bring the vehicle purchase documents and your income information, and mention that you bought an electric vehicle.

You must file your return to claim the credit—you cannot claim it if you file an extension or do not file at all. The credit applies to the tax year in which you took ownership of the vehicle, so a purchase in January 2024 is claimed on your 2024 return, filed in early 2025.

Point-of-Sale Transfers: Getting the Credit at the Dealership

Some dealerships now participate in the IRS point-of-sale transfer program, which lets you assign your tax credit to the dealer at the time of purchase. The dealer then reduces your out-of-pocket cost by the credit amount, and they claim the credit on their own taxes instead. This means you do not have to wait until you file your return to benefit from the credit.

Not all dealerships offer this yet, and it is optional—you can choose to claim the credit yourself on your tax return instead. If the dealer offers it, they will explain the process during financing. The credit amount is the same either way; the only difference is timing and who claims it.

To use point-of-sale transfer, you must meet the income limits at the time of purchase. The dealer will verify your income using a third-party service before finalizing the transfer. If you are over the income limit, you cannot use point-of-sale transfer, but you may still be able to claim a partial or full credit on your tax return depending on your exact income.

Used Electric Vehicles and the $4,000 Credit

You may also claim a credit of up to $4,000 when you buy a used electric vehicle, but the rules are different from the new vehicle credit. The vehicle must be at least two years old, cost no more than $25,000, and be assembled in North America. There is no battery component requirement for used vehicles.

Income limits for the used vehicle credit are lower: $55,000 for single filers and $110,000 for joint filers, with no phase-out—you either may have access to or you do not. The vehicle must have been owned by someone else for at least one year before you buy it, so a one-year-old car from a dealer qualifies, but a one-year-old car from the original owner does not.

You claim the used vehicle credit on Form 8936 as well, using the same process as the new vehicle credit. The credit is based on the vehicle's sale price, not its original price, so a $20,000 used EV qualifies, but a $26,000 used EV does not.

What Happens If You Sell the Car or Move Out of the Country

Once you claim the credit on your tax return, it is yours to keep—selling the car later does not require you to pay it back. The credit is tied to your purchase and ownership in the year you bought it, not to how long you keep the vehicle.

If you move out of the United States, you can still claim the credit for the year you bought the car, as long as you file a U.S. tax return for that year. However, you cannot claim the credit if you are not a U.S. citizen or resident alien, or if you do not have a valid Social Security number or Individual Taxpayer Identification Number (ITIN).

Frequently Asked Questions

Can I get the credit if I lease an electric car instead of buying one?

No, the federal tax credit is only for purchases. However, some leases include a manufacturer rebate that functions similarly. Nissan, for example, offers lease deals that factor in the tax credit value. Ask the dealer whether the lease price already reflects any federal incentives.

What if the car I want does not may have access to for the full $7,500?

You can still claim whatever partial credit the vehicle qualifies for—often $3,750 or $5,000. Check the IRS list for your specific model and year. Some vehicles may may have access to for the full amount in future years as manufacturers adjust their supply chains.

Do I have to pay back the credit if my income changes after I buy the car?

No. The credit is based on your income in the year you bought the vehicle. If your income changes in a later year, it does not affect the credit you already claimed. However, if you claimed the credit and your actual income that year was above the limit, you may owe it back when you file your return.

Can I claim the credit if I buy the car through my business?

No, the credit is only for personal vehicles. If you buy an electric vehicle for business use, you cannot claim this credit, though you may be able to deduct the cost through depreciation or other business deductions. Speak with a tax professional about your specific situation.

What if I buy a car in December but do not take delivery until January?

The year that matters is the year you took ownership, not the year you paid for it or took delivery. If you signed the purchase agreement and took title in December, that is the tax year for the credit, even if the car arrives in January. Check your purchase documents for the ownership date.