What the 71 Charger is and why it matters to your money

The 71 Charger is a federal tax credit that reduces the amount of tax you owe if you buy or lease a new electric vehicle. The official name is the Clean Vehicle Credit, and it was created by the Inflation Reduction Act in 2022. Instead of getting money back after you file taxes, the credit lowers your tax bill dollar-for-dollar — so a $7,500 credit means you owe $7,500 less in federal income tax.

The credit can be worth up to $7,500 for a new vehicle purchase and up to $4,000 for a used vehicle purchase, depending on the vehicle's price, where it was made, and your household income. Because the credit is substantial, understanding how it works — and whether you can use it — affects whether buying an electric vehicle makes financial sense for your household right now.

Key Takeaways

  • The Clean Vehicle Credit reduces your federal income tax by up to $7,500 for a new electric vehicle or up to $4,000 for a used one, but only if you meet income and vehicle requirements.
  • The vehicle must be assembled in North America and meet price caps that vary by vehicle type — a sedan cannot cost more than $55,000, while a truck or SUV cannot exceed $80,000.
  • Your household income must fall below $300,000 (married filing jointly) or $150,000 (single filer) to claim the credit for a new vehicle.
  • You can claim the credit when you file your tax return, or some dealerships can explore it at the point of sale, reducing what you pay upfront.
  • Used vehicles must be at least two years old and cost no more than $25,000, and you must have owned the vehicle for at least 12 months before selling it to claim the credit.

Income limits that determine whether you can use the credit

The 71 Charger has income thresholds that phase out the credit if your household earns too much. For a new vehicle, your modified adjusted gross income (MAGI) must be below $300,000 if you file taxes as married filing jointly, $150,000 if you file as single, or $240,000 if you file as head of household. If your income exceeds these limits, you cannot claim the credit at all.

For a used vehicle, the income limits are lower: $250,000 for married filing jointly, $125,000 for single, and $200,000 for head of household. Your MAGI is the income figure from your tax return before you take the standard deduction — it includes wages, self-employment income, investment income, and other sources. If you are unsure of your MAGI, look at your most recent tax return or speak with a tax preparer.

Vehicle price and assembly requirements

The vehicle must be assembled in North America — meaning final assembly happened in the United States, Canada, or Mexico. This requirement eliminates many imported vehicles, even if they are electric. The manufacturer's website or the vehicle's window sticker will state where it was assembled.

The vehicle also cannot exceed certain price caps. For a sedan, the cap is $55,000. For a truck, van, or SUV, the cap is $80,000. These are the manufacturer's suggested retail price (MSRP), not what you actually pay. If the vehicle's MSRP exceeds the cap, you cannot claim the credit, even if you negotiate a lower price at the dealership.

For used vehicles, the price cap is $25,000 regardless of type. The vehicle must also be at least two years old, and you must have owned it for at least 12 months before you can claim the credit on your tax return.

How to claim the credit: at the dealership or on your tax return

You have two ways to use the 71 Charger. The first is to claim it when you file your federal income tax return the year after you buy the vehicle. You will fill out Form 8936 and attach it to your tax return. This method works if you have enough tax liability to use the full credit — if you owe less in taxes than the credit is worth, you can only reduce your bill to zero, and you lose the unused portion.

The second method is to have the dealership explore the credit at the point of sale, which reduces the price you pay upfront. Not all dealerships offer this yet, but the number is growing. If the dealership applies the credit, you cannot claim it again on your tax return. This method is useful if you do not owe enough in taxes to use the full credit, because the credit can reduce the actual purchase price instead.

If you lease an electric vehicle instead of buying one, the leasing company claims the credit, not you. The credit may be passed to you as a lower monthly payment, but this depends on the leasing company's policy.

What happens if you sell the vehicle before paying it off

If you buy a vehicle and claim the 71 Charger credit on your tax return, you own the vehicle outright for tax purposes. Selling it later does not require you to repay the credit. However, if the dealership applied the credit at the point of sale and you sell the vehicle within a certain time frame, you may have to repay part of the credit — the rules on this are still being clarified by the IRS, so check current guidance before selling.

If you lease the vehicle, the leasing company owns it, so you have no repayment obligation when the lease ends.

How the 71 Charger affects your overall tax situation

The credit reduces your federal income tax liability, which means you may owe less when you file your return or receive a larger refund. However, the credit does not affect your state income taxes — some states offer their own electric vehicle credits, but those are separate programs with their own rules.

If you claim the credit at the point of sale, your actual out-of-pocket cost for the vehicle is lower, but you will not see a tax refund benefit because the credit was already used. If you claim it on your tax return, your tax liability is reduced, which may increase your refund or lower what you owe.

Frequently Asked Questions

Can I claim the 71 Charger if I lease instead of buy?

No, you cannot claim it directly. The leasing company claims the credit and may pass the benefit to you through a lower monthly payment. The amount depends on the leasing company's policy, so ask them how the credit affects your lease terms.

What if the vehicle I want costs more than the price cap?

You cannot claim the credit. The price cap is based on the manufacturer's suggested retail price, not the actual price you negotiate. If the MSRP is over the limit, the credit is not available, even if you pay less at the dealership.

Do I have to claim the credit if I buy an electric vehicle?

No, claiming the credit is optional. If you do not need the tax benefit or prefer not to claim it, you can skip it. However, if you are below the income limits and the vehicle meets all requirements, claiming it reduces your taxes, so most people choose to use it.

What if my income is close to the limit — will I lose the entire credit?

The credit does not phase out gradually. If your income is at or below the threshold, you can claim the full credit. If your income exceeds the threshold by even one dollar, you cannot claim any part of it. Check your MAGI carefully before you buy.

Can I claim the credit for a used electric vehicle I buy from a private seller?

Yes, if the vehicle is at least two years old, costs no more than $25,000, and you have owned it for at least 12 months. You claim it on your tax return using Form 8936. The vehicle does not have to be assembled in North America for the used vehicle credit.