1. What is the EV Tax Credit?
- Purpose: A nonrefundable federal tax credit to incentivize the purchase of electric vehicles (EVs) or plug-in hybrids.
- Value:
- New EVs: Up to $7,500.
- Used EVs: Up to $4,000 (30% of the vehicle price).
- New Option:
- Transfer the credit to a dealer for an instant discount at the point of sale instead of claiming it on your tax return.
2. Income and Price Limits
Income Caps (Modified Adjusted Gross Income)
- New EVs:
- Single/married filing separately: $150,000.
- Head of household: $225,000.
- Married filing jointly: $300,000.
- Used EVs:
- Single/married filing separately: $75,000.
- Head of household: $112,500.
- Married filing jointly: $150,000.
Price Caps
- New Vehicles:
- SUVs, trucks, vans: MSRP $80,000.
- Other vehicles (e.g., sedans): MSRP $55,000.
- Used Vehicles: Purchase price $25,000.
3. Qualifying Vehicles
Examples of Eligible EVs
| Make & Model | Tax Credit | MSRP Limit |
|----------------------------------|----------------|-----------------|
| Acura ZDX | $7,500 | $80,000 |
| Tesla Model 3 Long Range AWD | $7,500 | $55,000 |
| Chevy Bolt EUV (2022–2023) | $7,500 | $55,000 |
| Ford F-150 Lightning | $7,500 | $80,000 |
| Volkswagen ID.4 | $7,500 | $80,000 |
- Note: Check specific trims and delivery dates for eligibility.
4. Eligibility Requirements
Battery Sourcing & Assembly
- Battery: Percentage of the battery must be assembled in North America.
- 2024: 60% (gradually increasing to 100% by 2029).
- Critical Minerals: Certain percentages must come from U.S. or trade-agreement nations.
- 2024: 50% (increasing to 80% by 2027).
- Final Assembly: Must occur in North America.
Used EVs
- Must be 2+ years old with a battery capacity of 7 kWh or more.
- Can only be claimed once every 3 years.
5. How to Claim the EV Tax Credit
Option 1: On Your Taxes
- File Form 8936 with your tax return.
- Nonrefundable: Can reduce tax liability to $0 but won’t provide a refund.
- Credit must be claimed in the year the car is delivered, not purchased.
Option 2: Dealer Transfer
- Transfer credit at the point of sale for an immediate discount.
- Must report the transfer on your tax return using Form 8936.
- Ensure all documentation (e.g., VIN, tax ID) is provided during purchase.
6. Additional Considerations
Leasing an EV
- Consumers cannot claim the tax credit directly but may receive discounts if dealerships pass on the commercial EV tax credit.
State Incentives
- Some states offer additional rebates (e.g., California’s Clean Air Vehicle program or New York's $2,000 rebate).
- Check for restrictions on combining federal and state incentives.
Tax Planning Tips
- If your income exceeds the cap, consider lowering it through 401(k) or HSA/FSA contributions.
- You can use your MAGI from either the year of delivery or the previous year.
7. Summary of EV Tax Credit Benefits
- New EVs: Up to $7,500, subject to sourcing and assembly requirements.
- Used EVs: Up to $4,000 for vehicles $25,000 and meeting specific conditions.
- Immediate Discount Option: Available through dealers in 2024.
- Nonrefundable Credit: Reduces tax liability but doesn’t provide excess refunds.
For personalized advice, consult a tax professional to ensure eligibility and maximize benefits.
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