EV Tax Credit: Your Guide for 2024 and 2025
If you’re considering purchasing an electric vehicle (EV), you might be eligible for a tax credit. This credit can significantly reduce the overall cost of your EV, offering savings either upfront or when you file your taxes.
Understanding the EV Tax Credit
The EV tax credit is a nonrefundable federal tax credit designed to encourage the purchase of qualifying EVs and plug-in hybrid vehicles. The amounts available are substantial: up to $7,500 for new EVs and up to $4,000 for used EVs.
Consumers have two main options for claiming the credit:
- Tax Filing: Claim the credit when you file your federal income taxes.
- Dealer Transfer: Transfer the credit to an eligible dealer for an immediate discount on the vehicle at the point of purchase.
As of 2024, the dealer transfer option allows consumers to lower the EV’s cost directly at the dealership, making the savings immediately accessible.
Which Vehicles Qualify?
The IRS provides the most current list of qualifying models on the FuelEconomy.gov website. This tool allows you to filter by purchase scenario, model year, and vehicle type to determine eligibility based on the delivery date.
Be mindful that some versions of a car model may not qualify. Always confirm with the dealer before making a purchase.
2025 Qualifying EVs
The following list includes fully electric and plug-in hybrid vehicles that may be eligible for a full or partial tax credit if delivered on or after January 1, 2025:
| $7,500 | $80,000 | | Chrysler Pacifica PHEV (2024-2025) | $7,500 | $80,000 | | Ford F-150 Lightning: FLASH Trim (2024-2025) | $7,500 | $80,000 | | Ford F-150 Lightning: LARIAT and XLT Trim (2023–2025) | $7,500 | $80,000 | | Honda Prologue (2024-2025) | $7,500 | $80,000 | | Jeep Wagoneer S (2025) | $7,500 | $80,000 | | Kia EV6 (2026) | $7,500 | $80,000 | | Kia EV9 (2026) | $7,500 | $80,000 | | Tesla Cybertruck: Single and Dual Motor (2025) | $7,500 | $80,000 | | Tesla Model 3 Long Range: AWD and RWD (2025) | $7,500 | $55,000 | | Tesla Model 3 Performance (2025) | $7,500 | $55,000 | | Tesla Model X AWD (2025) | $7,500 | $80,000 | | Tesla Model Y Long Range: AWD and RWD (2025) | $7,500 | $80,000 | | Tesla Model Y Performance (2025) | $7,500 | $80,000 |
Vehicles Delivered in 2024
For vehicles delivered between January 1, 2024, and December 31, 2024, the following models may be eligible for the tax credit if claimed on your 2024 tax return (filed in 2025):
Eligibility Requirements
To qualify for the EV tax credit, taxpayers and vehicles must meet specific criteria. These include:
- Income Limits: Your modified adjusted gross income (MAGI) must fall below certain thresholds.
- New EVs: $150,000 for single filers and those married filing separately, $225,000 for heads of household, and $300,000 for those married filing jointly.
- Used EVs: $75,000 for single filers and those married filing separately, $112,500 for heads of household, and $150,000 for those married filing jointly.
- Vehicle Price Caps: The vehicle’s MSRP must not exceed certain limits.
- Vans, SUVs, and pickup trucks: $80,000 or less.
- Sedans and passenger cars: $55,000 or less.
- Used EVs: $25,000 or less.
- Final Assembly: The vehicle must have final assembly in North America. You can verify this using the National Highway Traffic Safety Administration’s (NHTSA) VIN decoder.
Calculating the EV Tax Credit
The maximum credit of $7,500 for new EVs is divided into two components based on battery and sourcing requirements. To receive the full credit, the vehicle must meet both requirements:
- Battery Component: A portion of the credit (up to $3,750) is tied to the percentage of the vehicle’s battery that is assembled or manufactured in North America. The required percentages increase over time:
- 2023: 50%
- 2024: 60%
- 2025: 60%
- 2026: 70%
- 2027: 80%
- 2028: 90%
- 2029-2032: 100%
- Critical Minerals Component: The remaining portion of the credit (up to $3,750) depends on the percentage of critical minerals in the battery that are extracted or processed in the U.S. or a country with which the U.S. has a free-trade agreement. The percentages are:
- 2023: 40%
- 2024: 50%
- 2025: 60%
- 2026: 70%
- 2027-2032: 80%
If a vehicle meets only one of these requirements, the credit amount will be $3,750.
Used EV Tax Credit Qualifications
Qualified used EV purchases can provide a tax credit of up to $4,000, capped at 30% of the vehicle’s purchase price. Key qualifications include:
- The vehicle must be a plug-in electric or fuel cell vehicle with at least 7 kilowatt-hours of battery capacity.
- This credit is applicable only for the first transfer of a vehicle.
- The purchase price should not exceed $25,000.
- The vehicle model must be at least two years old.
- The vehicle must weigh less than 14,000 pounds.
- The credit can only be claimed once every three years.
How to Claim the EV Tax Credit
Option 1: Claiming on Your Taxes
To claim the clean vehicle tax credit on your federal income taxes, you will need to file Form 8936. The credit is nonrefundable, so it can reduce or eliminate your tax liability, but will not result in a refund exceeding your tax liability.
Typically, you can only claim the credit for the tax year the vehicle was delivered. For example, if you purchased the car in 2024 but took delivery in 2025, you claim the credit on your 2025 tax return (filed in 2026).
Option 2: Transferring the Credit to a Dealer
If you elect to transfer the credit to the dealership, you will receive an immediate discount on the vehicle instead of waiting to claim the credit on your taxes. While this lowers the price directly, you are still required to report the transaction on your tax return by filling out Form 8936. If your income is over the AGI limits, you will have to pay the IRS back the rebate amount.
Information Needed to Claim the Credit
Before you take delivery of a new EV, ensure you have the necessary documentation to claim the credit or report the purchase. Key information includes:
- Seller’s Information: Name and Taxpayer Identification Number (TIN).
- Purchaser’s Information: Name and TIN.
- Sale Details: Date of sale, sales price, and the maximum tax credit for the vehicle.
- Vehicle Information: VIN and battery capacity.
- Verification: Confirmation that you are the original user and a statement from the seller.
If transferring the credit to the dealer, provide your Taxpayer Identification Number, a photo ID, as well as attest to:
- AGI eligibility.
- Understanding the repayment requirement if your AGI is too high.
- The car’s primary use will be personal.
- You will file a tax return and provide the VIN and election date.
- Your voluntary transfer the credit.
Other EV Incentives
In addition to the federal tax credit, many states and local governments offer additional incentives for EVs. California, for example, provides access to carpool lanes, and New York offers rebates on top of the federal credit. Be aware of restrictions, as some jurisdictions may not allow you to claim both a state and a federal rebate.
Leasing an EV
While individual consumers usually cannot claim the EV tax credit when leasing, they may still benefit from savings passed down by the dealer. Businesses, including dealerships and leasing agencies, may qualify for the commercial vehicle tax credit, with potentially lower restrictions. This might enable dealers to reduce the lease cost by the credit amount, although dealers are not obligated to provide this discount.
Final Thoughts
The EV tax credit is an appealing incentive, however, it can be complex. If you’re uncertain about your eligibility or need guidance for your individual financial situation, consult a qualified tax professional such as a CPA or a tax preparer before making a decision.
