Molly Ayala
Electric vehicles (EVs) are becoming increasingly popular, and with them, the question of how to report the EV tax credit. The EV tax credit is a federal tax benefit for those who purchase qualifying new or used electric vehicles. The credit can be worth up to $7,500 for new vehicles and up to $4,000 for used vehicles, and it is offered to taxpayers who purchase qualifying electric vehicles or plug-in hybrid vehicles. To claim the credit, individuals need to file IRS Form 8936, the Qualified Plug-in Electric Drive Motor Vehicle Credit form, and attach it to their Form 1040 when filing their tax return.
| Characteristics | Values |
|---|---|
| Who qualifies for the tax credit? | Buyers of qualifying new or used electric vehicles |
| What are the qualifying vehicles? | New, qualified plug-in electric vehicles or fuel cell electric vehicles |
| What is the value of the tax credit? | Up to $7,500 |
| What is the tax credit for used electric vehicles? | Up to $4,000 or 30% of the sale price, whichever is lower |
| When does the tax credit expire? | December 31, 2032 |
| How to claim the tax credit? | File IRS Form 8936, the Qualified Plug-in Electric Drive Motor Vehicle Credit form |
| What are the requirements to qualify for the tax credit? | The vehicle must be purchased new, the manufacturer's suggested retail price (MSRP) cannot exceed $80,000, the vehicle must have a battery capacity of at least 7 kilowatt hours, the vehicle must have a gross vehicle weight rating of less than 14,000 pounds, the vehicle must be made by a qualified manufacturer (not required for fuel cell vehicles), the vehicle must undergo final assembly in North America, and the vehicle must meet the critical mineral and/or battery component requirements |
| What is the deadline to claim the tax credit? | File Form 8936 when you file your tax return for the year in which you take delivery of the vehicle |
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What You'll Learn
Claiming the credit on your tax return
If you've purchased a qualifying electric vehicle, you may be eligible for a federal tax credit of up to $7,500. This credit is designed to encourage the adoption of more eco-friendly vehicles and applies to certain new and used electric vehicles. To claim the credit on your tax return, here's what you need to do:
First, ensure your vehicle qualifies for the credit. Not all electric vehicles are eligible. To qualify, the vehicle must meet specific criteria, including:
- Being purchased new or used from a licensed dealer (no private sales)
- Having a manufacturer's suggested retail price (MSRP) that doesn't exceed certain limits
- Possessing a battery capacity of at least 7 kilowatt-hours
- Having a gross vehicle weight rating of less than 14,000 pounds
- Being manufactured by a qualified manufacturer (not required for fuel cell vehicles)
- Undergoing final assembly in North America
- Meeting critical mineral and/or battery component requirements
You can check the eligibility of your vehicle by visiting the FuelEconomy.gov website. This website allows you to filter vehicles by purchase scenario, model year, and type to determine if your car is eligible based on its delivery date. Additionally, the dealer should provide you with information about the vehicle's qualifications at the time of sale.
If your vehicle qualifies, you'll need to fill out IRS Form 8936, the Qualified Plug-in Electric Drive Motor Vehicle Credit form. This form can be used to claim either the Qualified Plug-In Electric Drive Motor Vehicle Credit or the new Clean Vehicle Credit. Form 8936 must be filed with your tax return for the year in which you take delivery of the vehicle. You will need to attach this form to your Form 1040 when filing your tax return.
To properly fill out Form 8936, you will need the following information:
- A copy of the time-of-sale report from your dealer, which includes your name and taxpayer identification number
- Your vehicle's Vehicle Identification Number (VIN)
- Other vehicle details, such as weight, battery capacity, final assembly location, and model year
By following these steps and providing the necessary information, you can claim the EV tax credit on your tax return, potentially saving you a significant amount on your annual tax bill.
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Qualifying vehicles
The Internal Revenue Service (IRS) determines whether your electric vehicle (EV) or fuel cell vehicle (FCV) qualifies for a tax credit based on its type, purchase date, and business or personal use. The EV tax credit is a federal tax benefit for those who purchase qualifying new or used electric vehicles. The credit is worth up to $7,500 for new vehicles and up to $4,000 for used vehicles, limited to 30% of the car's purchase price.
To qualify for the tax credit, your vehicle must meet certain requirements. Firstly, the vehicle must be purchased within the specified timeframes. For vehicles purchased after December 31, 2009, through December 31, 2022, or between January 1, 2023, and December 31, 2032, you can claim the respective credit by filling out Form 8936. Additionally, the vehicle must meet certain manufacturing and assembly criteria. To be eligible for the battery portion of the credit (up to $3,750), a certain percentage of the vehicle's battery components must be produced or assembled in North America. Furthermore, to receive the remaining $3,750 portion of the credit, the vehicle must meet the "critical minerals requirement." This means that a certain percentage of critical minerals in the car's battery must be extracted or processed within the United States or a country with which the U.S. has a free-trade agreement.
It is important to note that the requirements for the tax credit may change over time. For example, the percentage thresholds for the battery components and critical minerals requirements are set to increase annually starting in 2024. Additionally, vehicles with components from countries designated as "foreign entities of concern" will no longer be eligible for the tax credit from 2024 onwards.
To determine if a specific vehicle qualifies for the tax credit, you can use the tool on the FuelEconomy.gov website. This tool allows you to filter by purchase scenario, model year, and vehicle type to find eligible models. You can also refer to the Treasury Department's official list of eligible vehicles, which is updated as manufacturers submit information on the eligibility of their vehicles.
When purchasing an electric vehicle, it is important to ensure that the seller provides you with the required information about the vehicle's qualifications for the tax credit and registers this information with the IRS. Without this registration, your vehicle will not be eligible for the credit.
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Income limitations
The electric vehicle (EV) tax credit is a federal tax benefit for those who purchase qualifying new or used electric vehicles. The credit is up to $7,500 for new vehicles and up to $4,000 for used vehicles. The credit amount is non-refundable and considers factors like the vehicle's sourcing and assembly, which must be primarily in North America for the full credit.
To qualify for the EV tax credit, your income must fall below certain thresholds. Your modified adjusted gross income (MAGI) must not exceed $300,000 for married couples filing jointly or a surviving spouse. You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less. If your modified AGI is below the threshold in one of the two years, you can claim the credit.
If your MAGI is above the accepted limits, you must repay the IRS any rebate amount you accepted. The vehicle must also be for personal use, and you must file a tax return for the tax year in which you bought the car. You will need to provide the vehicle's identification number and the date of the transfer election to the IRS.
The IRS has a tool on the FuelEconomy.gov website for determining eligible models. You can filter by purchase scenario, model year, and vehicle type to find out if a vehicle is eligible for the credit. Dealers must also be qualified to pass on EV credit savings to consumers.
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Dealership requirements
- Registration with IRS Energy Credits Online: Dealerships must be registered with the IRS Energy Credits Online program. This allows them to submit and manage tax credit-related documentation for eligible vehicles.
- Reporting Obligations: Dealers are required to furnish a "time of sale report" to both the buyer and the IRS. This report confirms the vehicle's eligibility for the tax credit and must be submitted within three calendar days of the sale. Dealers should also provide buyers with a copy of the report and confirmation of its acceptance by the IRS.
- Information Provision: Dealerships must disclose specific information to buyers at the time of sale, including the vehicle's qualifications, any applicable credits, and the modified adjusted gross income requirements. This ensures buyers have the necessary details to make informed decisions.
- Income Requirements: While dealers are not responsible for verifying the eligibility of the buyer, they must provide information on any income requirements associated with the tax credit. This helps buyers understand their qualification for the credit.
- Vehicle Eligibility: Dealerships should ensure that the vehicles they offer meet the eligibility criteria for the tax credit. This includes factors such as the vehicle's manufacturing date, assembly location, battery specifications, and more.
- Online Approval: For vehicles placed in service on or after January 1, 2024, dealerships must ensure that the vehicle is approved through the IRS Energy Credits Online system at the time of sale. This provides real-time confirmation of the vehicle's eligibility.
- Void and Return Policy: Dealers can now cancel, return, or void time-of-sale reports for vehicles that are not placed in service. However, this action must be taken within 48 hours of submitting the report.
- Manufacturer Requirements: Dealerships should also be aware of any requirements pertaining to qualified manufacturers. This includes information on how credits are transferred, critical minerals and battery components, and any foreign entities of concern.
It is important to note that these requirements may evolve over time, and dealerships should stay updated with the latest guidelines provided by the IRS and other relevant authorities.
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Charging equipment tax credit
The federal EV charger tax credit for electric vehicle charging stations and equipment is back, thanks to the Inflation Reduction Act (IRA). This legislation also introduced a tax credit for new and used electric vehicles. The EV charger tax credit is a tax incentive of up to 30% of the total cost of equipment and installation, up to $1,000 for residential uses, and up to $100,000 per unit for commercial uses.
To claim the federal tax credit for your home EV charger or other EV charging equipment, file Form 8911 with the IRS when you file your federal income tax return. You will need your receipts that show the purchase price of the EV charger and any fees for installation. You will also need to know your tax liability for the year that you’re claiming the credit, as the EV charger tax credit is subtracted from any federal tax that you might owe on that year’s return. Note that the EV charger tax credit isn’t a refundable tax credit, so you won't receive cash back as a result of claiming the credit.
In addition to federal tax credits, there are also state and utility programs that offer incentives for EV charging stations. For example, Rockland Electric Company is offering the Commercial Charger Ready Program to help businesses in New Jersey offset 90% of the infrastructure costs associated with EV Charging Station installation. In New York State, electric vehicle tax credits and incentives are available for the purchase and installation of EV charging infrastructure for businesses and local government agencies. PepCo is providing make-ready infrastructure to support the deployment of Level 2 and DCFC electric vehicle chargers for public use in the District, and DTE Energy offers rebates for eligible business and commercial electric customers with eligible fleets that install qualified EV chargers.
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Frequently asked questions
To qualify for the tax credit, your vehicle must meet specific criteria. These include being purchased new, having a manufacturer’s suggested retail price (MSRP) that does not exceed a certain amount, having a battery capacity of at least 7 kilowatt hours, having a gross vehicle weight rating of less than 14,000 pounds, and being made by a qualified manufacturer.
To claim the EV tax credit, you will need to file IRS Form 8936, the Qualified Plug-in Electric Drive Motor Vehicle Credit form. To properly fill out this form, you will need the dealer's time-of-sale report and your vehicle's VIN. Attach Form 8936 to your Form 1040 when you file your tax return.
The deadline for reporting your electric vehicle for tax credit is when you file your tax return for the year in which you took delivery of the vehicle.
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