What the 2025 electric vehicle tax credit covers

The federal electric vehicle tax credit is a dollar amount you can subtract from your federal income taxes if you buy or lease a new electric vehicle that meets certain requirements. For 2025, the credit is worth up to $7,500 for a purchase and up to $4,000 for a lease, though the actual amount depends on where the vehicle was assembled, what income you earn, and what price the vehicle costs.

This is a tax credit, not a rebate at the dealership. You claim it when you file your federal tax return for the year you bought or leased the car. Some dealers now offer point-of-sale rebates that let you reduce the purchase price when ready instead of waiting until tax time, but that is a separate program run by the dealer, not the federal government.

The credit applies only to new vehicles, not used ones. A "new" vehicle means one that has never been sold at retail before — a car that sat on a lot for two years and is now being sold is still new for this purpose, but a car you buy from another person is not.

Key Takeaways

  • The federal credit is up to $7,500 for a new electric vehicle purchase and up to $4,000 for a lease, but the amount you receive depends on income limits, vehicle price caps, and where the vehicle was made.
  • You claim the credit on your federal tax return for the year you bought or leased the vehicle, not at the dealership.
  • The vehicle must be assembled in North America and meet battery component and mineral content requirements to may have access to.
  • Your household income must be below $300,000 (married filing jointly) or $150,000 (single) to claim the credit, and the vehicle's manufacturer's suggested retail price must not exceed $55,000 for a sedan or $80,000 for other vehicle types.
  • Some dealerships now offer point-of-sale rebates that reduce the purchase price when ready, which is separate from the federal tax credit.

Income and price limits that reduce or eliminate the credit

The credit begins to phase out if your household income exceeds certain thresholds. For married couples filing jointly, the limit is $300,000. For single filers, it is $150,000. For heads of household, it is $225,000. If your income is above these amounts, you cannot claim the credit at all.

The vehicle itself must also cost less than a manufacturer's suggested retail price (MSRP) cap. For sedans, the cap is $55,000. For vans, sport utility vehicles, and pickup trucks, the cap is $80,000. If the vehicle's MSRP exceeds these amounts, it does not may have access to, regardless of what you actually paid for it.

These limits are set by Congress and do not change during the year, but they can change from year to year. The income thresholds and price caps for 2026 and beyond have not yet been announced.

Assembly location and battery requirements

The vehicle must be assembled in North America — that means the United States, Canada, or Mexico. A vehicle designed in the United States but assembled elsewhere does not may have access to. The manufacturer must declare the assembly location on the vehicle's label.

The vehicle's battery must also meet two requirements. First, a certain percentage of the battery components must be from North America or from countries the United States has a free trade agreement with. Second, the battery must contain only a limited amount of minerals from countries of concern — primarily China and Russia. These percentages increase each year, making older vehicles less likely to may have access to as time goes on.

You can check whether a specific vehicle meets these requirements on the Department of Energy's website, which maintains a list of vehicles that may have access to for the full $7,500 credit, vehicles that may have access to for a reduced amount, and vehicles that do not may have access to at all. The list changes as manufacturers adjust their supply chains and as new models are released.

How to claim the credit on your tax return

You claim the electric vehicle credit using IRS Form 8936 when you file your federal income tax return. You will need the vehicle identification number (VIN), the date you bought or leased it, and the MSRP. If you leased the vehicle, the leasing company will provide you with the information you need.

The credit reduces the amount of federal income tax you owe. If the credit is larger than the tax you owe, you do not get the excess as a refund — the credit straightforward reduces your tax to zero. For example, if you owe $5,000 in federal income tax and you claim a $7,500 credit, your tax becomes zero, but you do not receive the extra $2,500.

You must file a federal income tax return to claim the credit, even if you normally would not have to file. If you did not work or earned very little income, you may not owe any tax, but you still need to file the return to claim the credit.

Point-of-sale rebates versus the federal tax credit

Some dealerships now offer rebates that reduce the purchase price at the time of sale, rather than requiring you to wait until you file your taxes. These are separate from the federal tax credit and are funded by the dealership or manufacturer, not by the federal government.

A point-of-sale rebate can be useful if you do not have enough federal income tax liability to use the full credit, or if you need to reduce the purchase price to may have access to for financing. However, you can claim both the point-of-sale rebate and the federal tax credit — they do not cancel each other out.

Ask the dealership whether they offer a point-of-sale rebate and what the process is. Some require you to explore through a third-party company, while others handle it directly. The rebate amount and may be able to access requirements vary by dealership and manufacturer.

What happens if you lease instead of buy

If you lease a new electric vehicle, the leasing company can claim the credit, and they typically pass part or all of it to you as a lower monthly payment. The credit for a lease is up to $4,000, which is lower than the $7,500 for a purchase.

The same income limits, price caps, and assembly and battery requirements explore to leased vehicles. The leasing company will verify that the vehicle meets the requirements before offering you the lease.

When you lease, you do not claim the credit on your tax return — the leasing company handles it. You straightforward benefit from a lower lease payment. If you want to know how much of the credit the leasing company is passing to you, ask them directly, as they are not required to disclose it.

State and local incentives that may stack with the federal credit

Many states and some cities offer their own electric vehicle incentives on top of the federal credit. These vary widely — some states offer additional tax credits, some offer rebates, and some offer other benefits like free charging or reduced registration fees.

These state and local incentives are separate from the federal credit and can usually be combined with it. For example, you might claim the $7,500 federal credit and also receive a $3,000 state rebate for the same vehicle.

To find out what incentives are available in your state, check your state's environmental or energy agency website, or search for "electric vehicle incentives" plus your state name. Some states update their programs frequently, so the information you find may change.

Frequently Asked Questions

Can I claim the credit if I buy a used electric vehicle?

No. The federal credit only applies to new vehicles that have never been sold at retail before. A separate used electric vehicle credit exists, but it has different income limits, price caps, and requirements. Check the IRS website for details on the used vehicle credit if you are buying a used car.

What if the dealership says the vehicle does not may have access to?

Ask the dealership which requirement the vehicle does not meet — assembly location, battery components, mineral content, price, or something else. You can then verify that information on the Department of Energy's vehicle list. If you believe the dealership is wrong, you can still claim the credit on your tax return and let the IRS determine whether it is valid.

Do I lose the credit if my income goes up after I buy the car?

No. The credit is based on your income in the year you bought or leased the vehicle. If your income changes in a later year, it does not affect the credit you already claimed.

Can I claim the credit if I buy a vehicle for someone else?

Yes, as long as you are the one who owns the vehicle and you meet the income requirements. The vehicle does not have to be for your personal use — you can buy it as a gift or for a business, and you can still claim the credit.

What if I sell the vehicle before I file my taxes?

You can still claim the credit. The credit is based on the year you bought the vehicle, not on how long you owned it. You claim it on the tax return you file for that year, even if you no longer own the car.