Beatrice Lang
Electric vehicles (EVs) are becoming an increasingly popular option for car buyers. As of 2025, buyers of new and used EVs can benefit from a federal tax credit of up to $7,500 at the time of purchase. This credit is available for certain new, plug-in electric vehicles placed in service before 2023. Buyers can also claim a credit of up to $4,000 for eligible used electric vehicles. However, there are a few things to keep in mind when claiming this credit. Firstly, the credit is only available for vehicles purchased within specific time frames, and the rules and requirements for eligibility change annually. Secondly, the credit is non-refundable, and any excess value cannot be claimed on future tax returns. Finally, it's important to ensure that all the requirements set by the IRS are met, including income limits, and that the correct forms are submitted when filing your taxes.
| Characteristics | Values |
|---|---|
| Tax credit amount | Up to $7,500 for new vehicles, up to $4,000 for used vehicles |
| Vehicle type | New, qualified plug-in electric vehicle or fuel cell electric vehicle |
| Time of purchase | After December 31, 2009, through December 31, 2022, or January 1, 2023, through December 31, 2032 |
| Form | 8936 |
| Time to claim | When you file your tax return for the year in which you take delivery of the vehicle |
| Income limits | Yes |
| Price caps | $55,000 for cars, wagons, and hatchbacks, $80,000 for SUVs, vans, and light trucks |
| Other requirements | Minimum battery size of 7 kilowatt-hours, assembly in North America, no "critical minerals" sourced from a "foreign entity of concern" |
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What You'll Learn
Claiming the credit at the time of purchase
If you are planning to buy an electric vehicle, you may be eligible for a federal tax credit of up to $7,500 for new vehicles and up to $4,000 for used vehicles. This credit can be claimed at the time of purchase or when filing your tax return. Here are the key things to know about claiming the credit at the time of purchase:
When buying a new electric vehicle, you can choose to claim the full credit at the time of purchase. This is known as "transferring" or "signing over" the credit to an IRS-registered dealer. The dealer will then give you the credit amount in cash or apply it to reduce the cost of the vehicle. To do this, you must meet the income requirements and ensure that the vehicle you are purchasing is eligible for the credit.
Income Requirements
To be eligible for the credit, your modified adjusted gross income (AGI) 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 previous year, whichever is less. If your modified AGI is below the threshold in one of the two years, you can claim the credit.
Vehicle Eligibility
Not all electric vehicles qualify for the full $7,500 credit. To qualify for the full credit, the vehicle's assembly must primarily be in North America. The vehicle's manufacturer suggested retail price (MSRP) must also be within certain limits. For clean cars, the MSRP cannot exceed $55,000, while for SUVs, vans, and light trucks, the price cap is $80,000.
Dealership's Role
Most dealerships will handle the tax credit process during the purchase. They will report the necessary information to you and the IRS, including your name and taxpayer identification number, and vehicle details. The dealer will also need to complete a Form 15400 "Clean Vehicle Seller Report," which includes the vehicle identification number (VIN), your Social Security number, and other information.
Timing of Purchase
The timing of your purchase also matters. The rules and eligibility requirements for the EV tax credit have changed over the years and will continue to evolve. For example, there are different requirements for vehicles purchased before and after December 31, 2022. Make sure to stay up-to-date with the latest IRS guidelines to ensure you meet the requirements for claiming the credit at the time of purchase.
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Income limits
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. Eligibility depends on specific criteria, including income limits, vehicle assembly standards, and battery component requirements.
To qualify for the EV tax credit, your income must fall below certain thresholds. For new clean vehicle purchases in 2023 and beyond, your modified adjusted gross income (MAGI) for either the current year or the prior year must be $300,000 or less if you file taxes jointly with your spouse or are a surviving spouse, and $225,000 or less if you file taxes as the head of a household. For used clean vehicle purchases, your modified adjusted gross income for either the current year or the prior year must be $150,000 or less if you file taxes jointly with your spouse or are a surviving spouse, and $112,500 or less if you file taxes as the head of a household.
If your income falls within these limits, you can claim the EV tax credit on your federal income tax return by filing IRS Form 8936, Clean Vehicle Credits. You will need to provide your vehicle's Vehicle Identification Number (VIN) to complete the form.
It is important to note that the EV tax credit is non-refundable, meaning it can lower or eliminate your tax liability, but you will not receive any refund for any excess credit. Additionally, the tax credit is only available until December 2032, and the vehicle you plan to purchase must meet certain IRS specifications, including price caps and manufacturing guidelines.
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Vehicle assembly location
The vehicle's final assembly location is a critical factor in determining eligibility for the Clean Vehicle Credit. The Inflation Reduction Act of 2022 introduced a new requirement for final assembly in North America, effective from August 17, 2022. This applies to new electric, fuel cell electric, and plug-in hybrid electric vehicles acquired, delivered, and placed in service after August 16, 2022.
The final assembly location can be confirmed by checking the Vehicle Identification Number (VIN) or an information label affixed to the vehicle. The U.S. Department of Transportation's National Highway Traffic Safety Administration (NHTSA) provides a VIN decoder that can identify the vehicle's build plant, country of manufacture, and other details.
For vehicles purchased before August 17, 2022, final assembly in North America is not a requirement for tax credit eligibility. However, for vehicles acquired after this date, the North American final assembly requirement must be met for the Clean Vehicle Credit.
It is important to note that the build location may vary for some manufacturers, as some models are produced in multiple locations. Therefore, confirming the assembly location through the VIN or the information label is essential.
When filing for the Clean Vehicle Credit, individuals must provide the VIN of their vehicle. This VIN information is crucial for verifying the vehicle's eligibility, including its final assembly location, and ensuring that it meets the requirements for the tax credit.
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Battery requirements
The battery requirements for the electric vehicle tax credit are complex and subject to change. The requirements are part of a 10-year program, with incremental changes taking place each year. The requirements are aimed at reducing the dependence on foreign sourcing of battery components and materials. This means that the list of qualifying vehicles will frequently change as manufacturers adapt to the new requirements.
One of the key battery requirements is related to the minimum battery size. As of January 1, 2023, the minimum battery size for qualifying vehicles is 7 kilowatt-hours. Additionally, there are price caps in place that are based on the vehicle's manufacturer suggested retail price (MSRP). For cars, wagons, and hatchbacks, the price cap is set at $55,000, while for SUVs, vans, and light trucks, the price cap is $80,000. It is important to note that the MSRP includes factory options but excludes destination charges, dealer-installed options, taxes, and fees.
Another important aspect of the battery requirements is the sourcing of battery components and materials. There are restrictions on sourcing from "foreign entities of concern," primarily China and a few other countries. Instead, the minimums for battery component production and sourcing of key battery materials ("critical minerals") must be sourced from North America or countries with which the United States has free-trade agreements. These minimums are set to increase each year.
The battery requirements also apply to leased electric vehicles. However, it is important to note that the tax credit for leased vehicles belongs to the lessor, not the lessee. Leased electric vehicles are classified as "commercial vehicles" and are eligible for the entire federal clean vehicle credit, even if they do not meet the strict battery and sourcing requirements.
To summarize, the battery requirements for the electric vehicle tax credit are complex and dynamic. They include minimum battery size, price caps, and sourcing restrictions. These requirements are designed to reduce dependence on foreign sourcing and promote the use of electric vehicles in North America. It is essential to stay informed about the latest requirements and consult official sources, such as the IRS and fuel economy websites, to ensure accurate and up-to-date information.
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Claiming the credit when filing taxes
If you are eligible for an electric vehicle tax credit, you can claim it when you file your federal income tax return with the IRS. The tax credit is taken in the year you take delivery of a qualifying "clean vehicle". The credit is up to $7,500 for new vehicles and up to $4,000 for eligible used electric vehicles. The credit amount considers factors like the vehicle's sourcing and assembly (which must primarily be in North America for the full credit) and when you placed your vehicle into service.
To claim the credit, you must file Form 8936 when you file your tax return for the year in which you take delivery of the vehicle. This is true whether you transferred the credit at the time of sale or are waiting to claim it when you file your taxes. Form 8936 is the official IRS form used to claim the Qualified Plug-In Electric Drive Motor Vehicle Credit or the new Clean Vehicle Credit. You can use Form 8936 to claim either the Qualified Plug-In Electric Drive Motor Vehicle Credit or the new Clean Vehicle Credit. The Qualified Plug-In Electric Drive Motor Vehicle Credit and the new Clean Vehicle Credit are each worth up to $7,500.
The Qualified Plug-In Electric Drive Motor Vehicle Credit has been replaced with the Clean Vehicle Credit for qualifying vehicles purchased after December 31, 2022. The credit for personal vehicles is non-refundable, and any excess value can't be claimed on future tax returns. However, if you're claiming the credit as a depreciable business asset, you can carry forward any unused portion as a general business credit. The Qualified Plug-In Electric Drive Motor Vehicle Credit is a tax credit available for certain new plug-in electric vehicles (EVs) placed in service before 2023.
If you purchased a qualifying plug-in EV or clean vehicle during the required timeframes (either after December 31, 2009, through December 31, 2022, or January 1, 2023, through December 31, 2032), you can claim the respective credit by filling out Form 8936 and attaching it to your Form 1040 when you file your tax return. You can't claim both credits on the same vehicle.
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Frequently asked questions
The maximum tax credit available for an eligible new electric vehicle is $7,500.
Yes, there is a tax credit of up to $4,000 for eligible used electric vehicles.
You can claim the tax credit when you file your federal income tax return for the year in which you take delivery of the vehicle.
You need to file Form 8936 to claim the Qualified Plug-In Electric Drive Motor Vehicle Credit or the new Clean Vehicle Credit.
Yes, there are income limits to claim the electric vehicle tax credit. The modified adjusted gross income (AGI) must not exceed $300,000 for married couples filing jointly or a surviving spouse.
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