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If you have purchased a new, qualified plug-in electric vehicle (EV) in 2022 or before, you may be eligible for a federal tax credit of up to $7,500. This credit is known as the Qualified Plug-in Electric Drive Motor Vehicle Credit and is available to individuals and businesses. The credit is non-refundable, meaning you can't get back more than you owe in taxes, and any excess credit cannot be applied to future tax years. To claim the credit, you must file Form 8936 with your tax return for the year in which you took delivery of the vehicle. This form can be used to claim either the Qualified Plug-In Electric Drive Motor Vehicle Credit or the new Clean Vehicle Credit, which replaced the former for qualifying vehicles purchased after December 31, 2022.
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What You'll Learn
Claiming the credit for a plug-in electric vehicle purchased before 2022
If you bought a new, qualified plug-in electric vehicle (EV) in 2022 or before, you may be eligible for a federal tax credit of up to $7,500. This credit is known as the Clean Vehicle Credit and was previously called the Qualified Plug-in Electric Drive Motor Vehicle Credit.
To claim the credit, you need to file IRS Form 8936 with your federal income tax return for the tax year when you took possession of the vehicle. You'll need the Vehicle Identification Number (VIN) for your electric vehicle to complete the form.
The credit is non-refundable, meaning you can't get back more on the credit than you owe in taxes, and you can't apply any excess credit to future tax years.
In addition to the standard requirements, there were specific rules for vehicles purchased between August 17, 2022, and December 31, 2022. For these vehicles, the final assembly must have occurred in North America, and the vehicle must have been placed in service before January 1, 2023.
If you entered into a written binding contract to purchase a qualifying vehicle before August 16, 2022, but took delivery on or after this date, you may elect to claim the credit based on the prior rules. In this case, you would need to claim the credit on your 2022 tax return after taking delivery of the vehicle.
It's important to note that the federal tax credit for plug-in electric vehicles can be complicated, and there may be additional requirements or limitations that apply. For the most up-to-date and accurate information, it is recommended to refer to the IRS Clean Vehicle Credit website or consult a tax professional.
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How to fill out Form 8936
Form 8936 is an IRS form that allows taxpayers to claim a tax credit for purchasing a plug-in electric vehicle. The form can be used as long as the filer's new plug-in electric vehicle meets certain eligibility requirements. The tax credit is nonrefundable, and you can only claim it once for each qualifying vehicle.
To fill out Form 8936, you will need to provide specific information about your vehicle, including the Vehicle Identification Number (VIN) and the date of purchase. You will also need to determine the credit amount you are eligible for, which depends on the capacity of the electric battery and the timeframe in which you purchased the vehicle. For vehicles purchased in or before 2022 with a five-kilowatt-hour battery, the credit is $2,917, increasing by $417 per additional kilowatt-hour over 5 kWh up to a maximum of $7,500. For vehicles purchased between January 1 and April 17, 2023, the base amount is $2,500, with the same incremental increase of $417 per kilowatt-hour over 5 kWh, up to a maximum of $7,500. For vehicles placed in service beginning April 18, 2023, the new Clean Vehicle Credit consists of two $3,750 requirements that total $7,500—battery components and critical minerals.
In addition to the information above, you will need to provide your modified adjusted gross income to determine eligibility for the tax credit. The cost of the vehicle must also be within certain limits for you to qualify. If you are claiming the credit for a used vehicle, there are additional requirements, including the vehicle's model year, its previous use, and whether it was purchased from a dealer.
Once you have completed Form 8936, you can submit it along with your taxes when you file them for the year. For vehicles purchased after 2023, you may have the option to transfer the credit amount to the dealer at the time of sale and receive an immediate financial benefit instead of a tax credit. If you choose to do this, you must file Form 8936 and Schedule A with your return for the tax year in which the vehicle was placed in service.
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Income limits for claiming the credit
The income limits for claiming the federal tax credit for plug-in electric vehicles in the US are determined by the buyer's modified adjusted gross income (MAGI or AGI). The income limits vary depending on the buyer's tax filing status. For example, for married couples filing jointly or a surviving spouse, the AGI may not exceed $300,000.
If you are buying a new electric vehicle, your modified AGI must be below the threshold in at least one of the two years: the year of purchase or the year before. You can use the modified AGI from the year you take delivery of the vehicle or the previous year, whichever is less. If your modified AGI is below the threshold in one of these two years, you can claim the credit.
For used vehicles, the income limits are also determined by the buyer's modified AGI. The limits vary depending on filing status, with income caps ranging from $75,000 to $150,000. The vehicle must be purchased from a dealer, not a private party, and it must be at least two years old.
It is important to verify that you meet the income requirements; otherwise, you may need to repay the IRS if your modified AGI is higher than the authorized limits.
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Requirements for vehicles assembled in multiple locations
If you are planning to claim a federal tax credit for a plug-in electric vehicle assembled in multiple locations, you should check both sets of details for the vehicle on the Department of Energy website. This is because some models are built in multiple locations, so you should check both criteria for your specific vehicle. The build location of a particular vehicle can be confirmed by referring to its Vehicle Identification Number (VIN) using a VIN decoder or an information label affixed to the vehicle. The U.S. Department of Transportation's NHTSA provides a VIN decoder that can be used to identify a vehicle's build plant and country of manufacture, as well as other details.
Additionally, it is important to note that the requirements for claiming the federal tax credit for plug-in electric vehicles changed on August 17, 2022, due to the Inflation Reduction Act of 2022. For vehicles purchased on or after this date, a North American final assembly requirement applies. This means that to be eligible for the Clean Vehicle Credit, a vehicle must have undergone final assembly in North America. However, this requirement does not apply to vehicles purchased before August 17, 2022.
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How to claim the credit for a vehicle purchased in 2023 or after
If you purchased a new, qualified plug-in electric vehicle (EV) or fuel cell electric vehicle (FCV) in 2023 or after, you may be eligible for a clean vehicle tax credit of up to $7,500 under Internal Revenue Code Section 30D. The credit is available to individuals and businesses, but there are some conditions you must meet to qualify.
Firstly, the vehicle must be new, and the manufacturer's suggested retail price (MSRP) must not exceed $80,000 for vans, sport utility vehicles, and pickup trucks. The vehicle must also be used primarily in the US and made by a manufacturer that hasn't sold more than 200,000 EVs in the US.
Secondly, your modified adjusted gross income (MAGI) must not exceed $300,000 for married couples filing jointly or a surviving spouse, or $225,000 for those filing as Head of Household. You can use your MAGI from the year you take delivery of the vehicle or the year before, whichever is less.
If you meet the above requirements, you can claim the credit by filing Form 8936, Clean Vehicle Credits, with your tax return for the year in which you take delivery of the vehicle. You will need to provide your vehicle's VIN, which can be found on the window sticker. The dealer should give you a paper copy of a time-of-sale report when you complete your purchase.
It is important to note that the credit is non-refundable, so you cannot get back more on the credit than you owe in taxes, and you cannot apply any excess credit to future tax years.
Frequently asked questions
The maximum federal tax credit you can claim for purchasing a plug-in electric vehicle is $7,500.
The minimum federal tax credit you can claim is $2,500.
You need to fill out Form 8936 to claim the federal tax credit for purchasing a plug-in electric vehicle.
To be eligible for the federal tax credit, the plug-in electric vehicle must:
- Be new
- Be used primarily in the U.S.
- Be made by a manufacturer that hasn't sold more than 200,000 EVs in the U.S.
- Have a manufacturer suggested retail price (MSRP) of no more than $80,000 for vans, sport utility vehicles, and pickup trucks
- Undergo final assembly in North America
