Understanding the EV Tax Credit in 2024
As of January 1, 2024, there are two ways to claim the federal tax credit for purchasing a new electric vehicle (EV). If, however, you ordered an EV in 2023 but took delivery in 2024 or 2025, the new rules apply.
Option 1: Claiming the Credit at the Point of Sale
The newest option, available from 2024 onward, enables new-car buyers to receive the full EV tax credit at the time of purchase. In this scenario, you effectively “transfer” or assign the credit to an IRS-registered dealer. The dealer then provides you with the credit amount in cash or applies it directly to the vehicle’s price.
One significant advantage of this option is that, as long as you satisfy the income requirements, you can receive the full credit at the point of purchase, regardless of your total tax liability. However, it is crucial to meet the income limits. Otherwise, the IRS will require you to repay the credit.
Option 2: Claiming the Credit When Filing Taxes
Claiming the credit when you file your taxes on IRS Form 8936 remains a viable option, and it was the only method available for those who bought EVs in 2023. If you choose this route, the credit is limited to the total amount of taxes you owe. According to the IRS, the credit is nonrefundable.
For instance, if your vehicle qualifies for a $7,500 credit, but you only owe $4,000 in federal taxes for the year, you will not receive the extra $3,500.
Determining Your Tax Liability
This section of our article is to help you estimate how much income you would need to owe $7,500 in taxes. For tax-year 2024, you would need to have a taxable income of at least $55,400 if filing as a single person, $62,700 for head of household, and $66,150 for joint filers. However, the exact income needed to owe $7,500 can vary significantly based on individual circumstances and available deductions.
The Used EV Credit: What You Need to Know
Introduced in 2023, a credit of up to $4,000 is available for purchasing a qualifying used EV from a licensed dealer. As of 2024, used-car buyers can also opt to receive the credit at the point of sale.
As with new vehicles, you can transfer the credit to a registered dealer, and the dealer will then provide the credit amount in cash or apply it to the vehicle’s price. You also get the full credit at purchase, regardless of how much you owe in taxes later. However, if you exceed the specified income limits, which are lower for the used credit, you would have to repay the credit to the IRS.
For those who claimed the credit when filing their 2023 taxes, the credit is limited to the amount of taxes owed. The maximum credit for used EVs is $4,000 or 30% of the sale price, whichever figure is lower.
Additional requirements apply:
- The used vehicle’s sale price must be $25,000 or less.
- The vehicle must be at least two model years old.
- The buyer’s adjusted gross income (AGI) is limited to $75,000 for individuals, $150,000 for a joint return, and $112,000 for heads of households.
The Environmental Protection Agency (EPA) maintains a list of qualifying used EVs and PHEVs; you can find this information on the EPA website.
