What the EV Tax Credit Is

The electric vehicle tax credit is a reduction in the federal income tax you owe if you buy a new electric car. Instead of paying the full amount of tax due, you subtract the credit from what you owe. The credit can be worth up to $7,500 on your 2024 tax return, though the actual amount depends on which vehicle you buy, where it was made, and your household income.

This is a tax credit, not a rebate or discount at the dealership. You do not get money back when you purchase the car. Instead, you claim the credit when you file your federal income tax return for the year you bought the vehicle. The IRS then reduces your tax bill by that amount.

Key Takeaways

  • The EV tax credit reduces your federal income tax bill by up to $7,500 in the year you buy a new electric vehicle.
  • You claim the credit on your federal tax return, not at the dealership, and you must have owned the car for at least one day in the tax year.
  • The credit amount depends on the vehicle's price, where it was assembled, and income limits that vary by household size.
  • Not all electric vehicles may have access to—the vehicle must meet battery component and mineral content requirements set by the IRS.
  • If you owe less tax than the credit amount, you may lose the unused portion, though some vehicles allow you to carry it forward.

Income Limits and Vehicle Price Caps

The credit begins to phase out if your household income exceeds certain thresholds. For 2024, the limits are $300,000 for joint filers, $150,000 for single filers, and $200,000 for heads of household. If your income is above these amounts, you cannot claim the credit.

The vehicle itself must also meet a price cap. New sedans cannot cost more than $55,000, and new vans, SUVs, and pickup trucks cannot exceed $80,000. These are manufacturer suggested retail prices before any discounts or incentives. If the vehicle costs more than the cap, you do not may have access to.

Where the Vehicle Must Be Made

The vehicle must be assembled in North America to may have access to for the full $7,500 credit. This includes cars built in the United States, Canada, or Mexico. If the vehicle was assembled elsewhere, it does not may have access to for the credit.

Additionally, the battery components and minerals used in the vehicle must meet specific sourcing requirements. The IRS publishes lists of which vehicles meet these requirements each year. You can check the IRS website or ask the dealership whether a particular model qualifies.

How Much Credit You Actually Receive

The credit is split into two parts: $3,750 for battery components and $3,750 for mineral content. A vehicle must meet both requirements to receive the full $7,500. If it meets only one requirement, you receive $3,750. If it meets neither, you receive nothing.

The battery component requirement looks at where the battery's parts come from. The mineral content requirement looks at where critical minerals like lithium, cobalt, and nickel are sourced and processed. Both thresholds become stricter each year, so a vehicle that may have access to last year may not may have access to this year.

Claiming the Credit on Your Tax Return

You claim the EV tax credit using Form 8936, which you file with your federal income tax return. You will need the vehicle identification number (VIN), the date you took ownership, and the manufacturer's suggested retail price. The dealership can provide the VIN and purchase date; the price is usually on the window sticker.

You must have owned the vehicle for at least one day during the tax year to claim the credit. If you bought the car on December 31, you can claim the credit on that year's return. If you sold the vehicle during the year, you can still claim the credit as long as you owned it for at least one day.

File Form 8936 with your 1040 return. If you use tax software, it will usually walk you through the questions and generate the form automatically. If you use a tax preparer, give them the vehicle information and they will handle the form.

What Happens If the Credit Exceeds Your Tax Bill

The credit reduces your federal income tax dollar for dollar. If you owe $5,000 in federal tax and claim a $7,500 credit, your tax bill becomes zero. However, you do not receive the extra $2,500 as a refund—that portion is lost.

Some vehicles allow you to carry unused credit forward to the next year. Check the IRS guidance for your specific vehicle model. Most vehicles do not allow carryover, so if the credit exceeds what you owe, you lose the difference.

This is why the credit is most valuable if you owe at least $7,500 in federal tax. If you typically owe less, you may not benefit from the full amount. A tax preparer can help you estimate whether you will owe enough to use the entire credit.

Vehicles That Do Not may have access to

Used electric vehicles have a separate, smaller credit of up to $4,000, with different rules. This article covers only new vehicles. If you are buying a used EV, the rules are different.

Luxury vehicles and high-priced models often exceed the price caps. Some popular models have been removed from the may have access to list because their battery components or minerals no longer meet the sourcing requirements. Check the current IRS list before assuming your vehicle qualifies.

Frequently Asked Questions

Can I get the credit at the dealership instead of on my tax return?

Some dealerships can transfer the credit to the manufacturer as a point-of-sale discount, which reduces your purchase price when ready. This is optional and not available at all dealerships. Ask your dealer whether they offer this option. If they do, you will not claim the credit on your tax return—the dealer handles it.

What if I buy a used electric vehicle?

Used EVs have a separate credit of up to $4,000 with different income limits and vehicle price caps. The vehicle must be at least two years old and cost less than $25,000. The rules are stricter than for new vehicles, so check the IRS guidance for used EV details.

Do I lose the credit if I sell the car before filing my tax return?

No. You can claim the credit as long as you owned the vehicle for at least one day during the tax year. If you bought it in January and sold it in March, you still claim the credit on that year's return. The credit is based on ownership during the year, not on how long you keep the car.

Can I claim the credit if my income is slightly above the limit?

No. The income limits are firm cutoffs. If your household income exceeds the threshold for your filing status, you cannot claim any part of the credit. There is no phase-out—you either may have access to or you do not.

What if the vehicle I want is not on the IRS list?

The IRS publishes an updated list of may have access to vehicles each year. If your vehicle is not on the list, it does not meet the battery component or mineral content requirements. You can check the IRS website or ask the manufacturer whether the vehicle will may have access to in a future year as sourcing requirements change.