EV Tax Credit: Rules for New and Used Electric Vehicles

The 2024 electric vehicle tax credit has been expanded and modified. Here are the rules, restrictions and how to qualify.

Sabrina Parys
Assistant Assigning Editor | Taxes, Investing

Sabrina Parys is an assistant assigning editor on the taxes and investing team at NerdWallet, where she manages and writes content on personal income taxes. Her previous experience includes five years as a copy editor and associate editor in academic and educational publishing. She is based in Brooklyn, New York.

Michael Randall
Certified Financial Planner®

Michael Randall, CFP®, EA is a senior wealth advisor at Myers Financial Group, a fee-only fiduciary wealth management firm based in San Diego, California. Michael is passionate about investment advice, wealth management, and tax planning. Prior to his time at Myers Financial Group, Michael worked as a financial advisor at a $4B wealth management firm with offices along the West Coast. Michael earned an undergraduate degree in economics at the University of California, Berkeley. He volunteers as a University of California, Berkeley alumni ambassador. Michael is a certified financial planner and an IRS enrolled agent.

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Chris Davis is an assigning editor on the investing team. As a writer, he covered the stock market, investing strategies and investment accounts, and as a spokesperson, he appeared on NBC Bay Area and was quoted in Forbes, Apartment Therapy, Martha Stewart and Lifewire, among others. His work has appeared in The Associated Press, The Washington Post, MSN, Yahoo Finance, MarketWatch, Newsday and TheStreet. Previously, he was the content manager for the luxury property management service InvitedHome and the section editor for the legal and finance desk of international marketing agency Brafton. He spent nearly three years living abroad, first as a senior writer for the marketing agency Castleford in Auckland, NZ, and then as an English teacher in Spain. He is based in Longmont, Colorado.

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Table of Contents

Table of Contents

If you're in the market for an electric car this year, there may be some savings in it for you — either upfront or later on.

Those who buy new electric vehicles may be eligible for a tax credit of up to $7,500, and used electric car buyers may qualify for up to $4,000. New in 2024, consumers can also opt to transfer the credit to an eligible dealer instead for an immediate discount on the vehicle at the point of sale.

However, there may be some hiccups for consumers as changes to the electric vehicle tax credit roll out: fewer cars are qualifying for the benefit in 2024 than previously, as battery manufacturing restrictions tighten. Here's what you need to know about the federal tax incentives for electric vehicles and an overview of which cars may qualify for the new credit according to the IRS.

What is the electric vehicle tax credit?

The electric vehicle tax credit, or the EV credit, is a nonrefundable tax credit offered to taxpayers who purchase qualifying electric vehicles or plug-in hybrid vehicles. Nonrefundable tax credits lower your tax liability by the corresponding credit amount but do not result in a refund of any excess credit amount.

In 2024, taxpayers also get another option: they can choose to transfer the tax credit to an eligible dealership instead of claiming it on their tax returns the following year. This would allow the dealer to lower the cost of the vehicle by the corresponding credit amount for an immediate point-of-sale discount [0]

To qualify for either option, your income must fall beneath certain thresholds, and the vehicle you plan to purchase must also meet several IRS specifications, including price caps and manufacturing guidelines.

» Curious about other tax incentives for going green? How the solar tax credit works

Which cars qualify for a federal EV tax credit?

As of September 2024, the following fully electric and plug-in hybrid vehicles may be eligible for either a full or partial tax credit if delivered on or after Jan. 1, 2024.

The IRS urges taxpayers to use the tool on the FuelEconomy.gov website for the most up-to-date information on eligible models. You can filter by purchase scenario, model year, and vehicle type and determine which car is eligible based on its date of delivery. Be sure to check with the dealer as well, the IRS warns, because some versions of the cars below may not qualify.

Car Make and Model

Tax Credit Amount

Q5 PHEV 55 TFSI e quattro (2023-2024) Q5 S Line 55 TFSI e quattro (2023-2024)

Bolt (2022-2023) Bolt EUV (2022-2023)

Pacifica PHEV (2022-2024)

F-150 Lightning: Standard, Extended Range Battery (2022-2024)

Grand Cherokee PHEV 4xe (2022-2024)

Wrangler PHEV 4xe (2022-2024)

Corsair Grand Touring (2022-2024)

Leaf S (2024) Leaf SV Plus (2024)

R1S Dual Large (2023-2024) R1S Dual Standard, Standard+ (2024) R1S Performance Dual Standard+ (2024) R1S Quad Large (2022-2024)

R1T Dual Large (2023-2025) R1T Dual Max (2023-2024) R1T Dual Performance Large (2023) R1T Dual Standard, Standard+ (2024) R1T Performance Dual Standard+ (2024) R1T Quad Large (2022-2024)

Model 3 Long Range AWD (2024)

Model 3 Long Range RWD (2024)

Model 3 Performance (2023-2024)

Model X AWD (2023-2024)

Model Y AWD (2023-2024) Model Y Long Range RWD (2024) Model Y Performance (2023-2024) Model Y RWD (2024)

ID.4 AWD Pro ID.4 AWD Pro S ID.4 AWD Pro S Plus

ID.4 Pro ID.4 Pro S ID.4 Pro S Plus

ID.4 S ID.4 Standard

How to qualify for the 2024 EV tax credit

Price cap

Vans, SUVs and pickup trucks must have an MSRP, or manufacturer's suggested retail price , of $80,000 or less to qualify. Other vehicles, such as sedans and passenger cars, are capped at $55,000. For used vehicles, the price cap drops to $25,000.

For new vehicles, the MSRP, as defined by the IRS, is the base retail price provided by the manufacturer, plus the retail price of each accessory or optional piece of equipment that is physically present on the car at the time of delivery to the dealer. For purposes of claiming the credit, MSRP does not include taxes and other fees added on by the dealer [0]

EV tax credit income limits

Along with price caps on cars, the EV tax credit also sets limits on the modified adjusted gross income that taxpayers can make in order to qualify.

New EVs

Used EVs

A nice bonus here is that, per the IRS, you can use your MAGI from either the year the car is delivered or the year before delivery [0]

. This means if your income exceeded the threshold one year, but was below the cap during the other year, you may still be able to snag a credit.

If your income precludes you from qualifying, there are also several tax strategies you can consider to lower your income throughout the year, such as maxing out your 401(k) or contributing to an HSA or FSA.

Final assembly requirements

To be eligible for the credit, vehicles must have had final assembly in North America. You can reference the National Highway Traffic Safety Administration’s VIN, or vehicle identification number, database to check out a car’s final assembly details [0]

Used EV tax credit qualifications

Qualifying used EV purchases can fetch taxpayers a credit of up to $4,000, limited to 30% of the car’s purchase price. Some other qualifications:

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How the electric vehicle tax credit is calculated

The new car tax credit, worth up to $7,500, consists of battery and sourcing requirements, each adding up to half of the credit. If the car meets both requirements, it is eligible for the full credit. If it meets only one requirement, it may be eligible for a partial credit of $3,750.

To be eligible for the battery portion of the credit (up to $3,750), a certain percentage of the vehicle’s battery must be assembled or manufactured within North America. The percentage thresholds will be as follows:

Cars must meet a "critical minerals requirement" to receive the remaining $3,750 portion of the credit. This requirement stipulates that a certain percentage of critical minerals in the car's battery must be extracted or processed within the U.S. or within a country with which the U.S. has a free-trade agreement. The percentage thresholds will be as follows:

How to claim the federal EV tax credit

How to claim the clean vehicle tax credit on your taxes

To claim the credit, you can file Form 8936 when you file your federal income taxes. The credit is nonrefundable, which means it can lower or eliminate your tax liability, but you won't get any overage of the credit refunded once your liability hits zero. You also won't be able to carry over any excess amount to offset future taxes [0]

Some fine print: According to the agency, you generally can only claim the clean vehicle tax credit for the tax year the vehicle was delivered to you, not necessarily the year it was purchased [0]

. This means, for example, that if you bought a qualifying EV in 2023 but didn't receive it until 2024, you must claim the credit on your 2024 tax return (filed in 2025).

How to transfer the clean vehicle tax credit to a dealer

Taxpayers who transfer the credit to the dealership get an immediate discount on the car rather than having to wait to claim a credit on their taxes. Although the discount has no effect on your tax bill, you still have to report the transaction on your tax return.

You’ll need to fill out Form 8936 when you file your return for that year to report on your election and provide the agency with your VIN. And buyer beware — if you take a rebate but are not eligible for it, you’ll be required to pay the IRS back [0]

What information do you need to claim the EV tax credit?

Before you leave a dealership with a new EV, make sure you have certain documents that you’ll need to claim the credit or report the purchase on your taxes.

If you’re claiming the credit on your tax return

Sellers must provide taxpayers with a report containing certain information about the vehicle — and this report should be furnished to the taxpayer by the date of the vehicle’s purchase. Make sure it includes the following:

If you’re transferring the credit to the dealer

If you’re electing to transfer the credit to the dealer for a direct discount, you must disclose your taxpayer identification number — typically your Social Security number — and a photo ID at the time of purchase:

You must also officially attest to, or confirm, the following information:

You understand that you must repay the IRS any rebate amount you accepted if your MAGI was above the accepted limits.

You will file a tax return for the tax year in which you bought the car and provide the vehicle’s identification number and the date of the transfer election to the IRS.

EV rebates and incentives

With all the focus on credits, it’s important to know about additional incentives on the state and local levels. California’s Clean Air Vehicle program, for example, grants carpool lane access to select electric vehicles. And New Yorkers might be eligible for a state-level rebate of up to $2,000 on top of the federal tax credit.

Make sure you’re aware of any restrictions that come with applying for multiple incentives, though. Some states may not allow you to “double-dip” or claim a state-level rebate on top of a federal one.

» Interested in a values-driven investing portfolio? Consider ESG investing

Leasing and the EV tax credit

Although individual consumers can’t claim the clean vehicle tax credit when leasing an EV, they might still see some trickle-down savings passed down from the dealer if they choose to lease.

Some businesses (i.e., dealerships and leasing agencies) may qualify for another type of tax credit called the commercial vehicle tax credit. The commercial credit is far less restrictive than the clean vehicle credit available to individual taxpayers. It allows businesses to claim tax breaks for a wider range of eligible electric vehicles, including ones that were not manufactured in the U.S. [0]

Even though the dealership gets the tax credit for purchasing the car, the potential benefit to individual consumers here is that the dealer can, in theory, then pass down the savings by lowering the leasing cost by the credit amount.

A word of caution for potential lessees, though: Just because the dealership could pass those savings onto you, doesn’t mean it will. Dealers aren’t required to give customers a discount on their leases, so it may require some negotiating on your end.

Assessing the transparency of any deal that claims the savings are being passed down may also require research and shopping around to ensure you’re getting the best deal. Plus, there are other factors about leasing that you may want to take into account.

The bottom line

The clean vehicle credit expansion is exciting news for taxpayers looking to go green, but it still remains fairly complicated and nuanced — especially given the murk surrounding the new sourcing requirements that are set to adjust each year. If you’re confused about your eligibility, or want guidance for your personal situation, consider consulting a qualified tax professional, such as a CPA or a tax preparer, before you sign on the dotted line.

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Sabrina Parys is a content management specialist on the taxes and investing team at NerdWallet, where she manages and writes content on personal income taxes. Her work has appeared in The Associated Press, The Washington Post and Yahoo Finance. See full bio.

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