IRS expands eligibility for electric vehicle tax credits (2024)

FAQs

How to qualify for the full $7500 federal electric vehicle tax credit? ›

The car must be at least 2 years old. If you bought it in 2023, it must be from model year 2021 or earlier. Used vehicles purchased before 2023 are not eligible. The vehicle must have been purchased from a qualified dealer who reports the transaction to the IRS.

Get Your Federal EV Tax Credit

The table below includes all 24 vehicles that qualify for the full $7,500 credit when placed into service on or after April 18, 2023. It also shows an additional 10 vehicles that qualify for a credit of $3,750. See all the details for various levels of EV tax credits at fueleconomy.gov.

To qualify for the tax credit, a car cannot cost more than $55,000. SUVs, pickups and vans can't exceed $80,000. And a buyer's gross income must be no more $150,000 if single, $300,000 if filing jointly and $225,000 if head of a household.

Modified adjusted gross income limits are $150,000 for individuals, $225,000 for heads of households, and $300,000 for joint returns. Any reported annual income below these thresholds should qualify you for some level of tax credit, as long as your new purchase is a qualifying electric vehicle.

To claim the credit, file Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles) with your tax return.

As part of the Inflation Reduction Act, beginning Jan. 1, 2023, the credit equals 30% of certain qualified expenses: Qualified energy efficiency improvements installed during the year which can include things like: Exterior doors, windows and skylights. Insulation and air sealing materials or systems.

Price cap. As of 2023, vans, SUVs and pickup trucks must have an MSRP, or manufacturer's suggested retail price, of $80,000 or under to qualify for the credit. Other vehicles, such as sedans and passenger cars, are capped at $55,000. For used vehicles, the price cap drops to $25,000.

Federal EV Tax Credit 2023: How it Works

For EVs placed into service in 2023, the up to $7,500 EV tax credit is extended for 10 years — until December 2032. The tax credit is taken in the year that you take delivery of the EV.

The credit is limited to 30% of the vehicle's purchase price. You can claim the credit once every three years.

The clean vehicle tax credit can provide up to $7,500 per new vehicle purchases, or $4,000 for used EVs. However, there are some important rules and restrictions to be aware of. Some of the most popular EVs are unlikely to qualify for a credit, and your state might also offer incentives for EV purchases.

How does the EV tax credit work if I don't owe taxes? ›

Federal electric vehicle tax credits are non-refundable. At most, they will reduce your tax liability to zero. If you don't owe taxes for the year in which the vehicle was purchased, the credit will not apply.

For single taxpayers and married individuals filing separately, the standard deduction rises to $13,850 for 2023, up $900, and for heads of households, the standard deduction will be $20,800 for tax year 2023, up $1,400 from the amount for tax year 2022.

Customers who take delivery of a qualified new Tesla vehicle and meet all federal requirements are eligible for a tax credit up to $7,500. Tax Credit for Each Vehicle: Model 3 Rear-Wheel Drive: $7,500. Model 3 Long Range: $7,500.

To claim the credit for a vehicle you took possession of in 2022, file Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles) with your 2022 tax return. You will need to provide your vehicle's VIN.

A tax credit is a dollar-for-dollar amount taxpayers claim on their tax return to reduce the income tax they owe. Eligible taxpayers can use them to reduce their tax bill and potentially increase their refund.