What is the electric vehicle tax credit?

Electric vehicles, also known as EVs or clean vehicles, derive all or part of their power from electricity, instead of an internal combustion engine powered by burning a mix of fuel and gases. Benefits of EVs include reduced fuel costs, lower petroleum consumption and reduced tailpipe emissions.

You may qualify for a tax credit on your 1040 when you buy an EV. The credit can be up to $7,500 but is subject to a phase-out based on the number of vehicles sold by the manufacturer.

Who is eligible to claim the credit?

Check out our blog, How You Can Benefit from the Electric Vehicle Tax Credit for a complete list of qualifications you must meet to claim the EV credit.

What’s new with the electric vehicle tax credit?

The Inflation Reduction Act introduced changes to the EV tax credit. Owners of EVs placed in service after December 31, 2022 are eligible for a tax credit of up to $7,500 ($4,000 or 30% of the vehicle price, whichever is less, for used EVs) for 10 years—until December 2032.

Additionally, the Act gives EV owners the option (starting in 2024) to take the EV tax credit as a discount at the time you buy the EV.

Keep in mind that the Inflation Reduction Act imposes income limits on who is eligible for the credit-

For new vehicles:

• Single/married filing separately: MAGI cannot exceed $150,000
• Head of household: MAGI cannot exceed $225,000
• Married filing jointly: MAGI cannot exceed $300,000

For used EVs, the following limits apply:

• Single/married filing separately: MAGI cannot exceed $75,000
• Head of household: MAGI cannot exceed $112,500
• Married filing jointly: MAGI cannot exceed $150,000

Additionally, to qualify for the 2024 credit:

• Vans, SUVs and pickup trucks must have an MSRP or Manufacturer’s Suggested Retail Price of $80,000 or less and sedans/passenger vehicles must have an MSRP of $55,000. The price cap drops to $25,000 for used vehicles.
• Vehicles must have had final assembly in North America

How do you claim on your taxes?

You must file Form 8936 to claim the EV credit.

Updated FAQs for 2024
The IRS has revised frequently asked questions (FAQs) regarding the EV tax credit. Here’s what has changed:

• Taxpayer Form: Report new clean vehicle VINs on Form 8936, Clean Vehicle Credits. (Topic A, Question 10)
• Seller Reports: Sellers must report specified information to both buyers and the IRS for eligibility for the new clean vehicle credit:
  • For 2023 sales, reports were due by February 15, 2024, via fax.
  • For 2024 and later sales, reports must be filed within three days via IRS Energy Credits Online.
  • Refer to Rev Proc 2022-42, Rev Proc 2023-33, and Rev Proc 2024-12. (Topic B, Question 11)
• Dealer Disclosures: Dealers must disclose the vehicle’s MSRP or sale price, maximum credit amount, other incentives, dealer-provided amounts, and income limits. For used vehicles, also include the model year and first transfer details. Buyers must attest to income eligibility. (Topic H, Questions 5 and 15)