What the federal electric vehicle tax credit is

The federal electric vehicle tax credit is a reduction in the federal income taxes you owe when you buy a new electric car. Instead of paying the full purchase price out of pocket, you can claim up to $7,500 back on your tax return — though the actual amount depends on the vehicle's price, where it was made, and your household income.

The credit works differently than a rebate at the dealership. You don't get money back when you buy the car. Instead, when you file your federal tax return for the year you bought it, you claim the credit on Form 8936, and it reduces the taxes you owe. If the credit is larger than your tax bill, you may get the difference as a refund, but this depends on your situation.

This credit has been part of federal tax law since 2009, but the rules changed significantly in August 2023 under the Inflation Reduction Act. The new rules are stricter about which vehicles may have access to and who can claim them.

Key Takeaways

  • The federal electric vehicle tax credit can reduce your federal income taxes by up to $7,500 when you buy a new electric car, but only certain vehicles and buyers may have access to.
  • The vehicle must meet requirements about its final assembly location, battery component sourcing, and mineral content to may have access to for any credit at all.
  • Your household income must be below a set limit — $300,000 for joint filers, $150,000 for single filers — to claim the credit.
  • You claim the credit on your tax return the year you bought the car, not at the dealership, and you must have owned the vehicle for at least one day in that tax year.
  • Some dealerships now offer the credit as a point-of-sale rebate, meaning you see the discount when you buy the car instead of waiting until tax time.

Which vehicles may have access to for the full $7,500 credit

Not every electric car qualifies. The vehicle must be a new car (not used), and it must meet three separate requirements about where and how it was built.

Final assembly location: The car must have been assembled in North America. This includes the United States, Canada, and Mexico. Many popular electric vehicles meet this requirement, but some imported models do not.

Battery component and mineral requirements: The battery must contain a certain percentage of components and minerals sourced from North America or from countries the U.S. has a free trade agreement with. These percentages increase each year. For 2024, the battery components must be at least 50% from may have access to sources, and battery minerals must be at least 50% from may have access to sources. These thresholds go up over time, making older vehicles less likely to may have access to in future years.

Price cap: The manufacturer's suggested retail price (MSRP) cannot exceed certain limits. For sedans, the limit is $55,000. For vans, SUVs, and pickup trucks, the limit is $80,000. If the vehicle costs more than this, it does not may have access to.

Income limits that determine whether you can claim the credit

Even if the vehicle qualifies, you must meet income requirements. Your modified adjusted gross income (MAGI) — which is close to your total household income — must be below a threshold that depends on your filing status.

For the 2024 tax year, the limits are: $300,000 for married couples filing jointly, $150,000 for single filers, and $240,000 for heads of household. These limits are adjusted each year for inflation, so they may be slightly different for 2025.

If your household income is above these limits, you cannot claim the credit, even if you buy a may have access to vehicle. The income limit applies to the year you buy the car, not the year you claim it on your tax return.

How much credit you actually receive

The credit is split into two parts: $3,750 for battery components and $3,750 for battery minerals, totaling $7,500. However, you only receive the full amount if the vehicle meets all the sourcing requirements listed above.

If the vehicle fails to meet the battery component requirement, you lose the $3,750 component credit. If it fails the mineral requirement, you lose the $3,750 mineral credit. If it fails both, you receive $0. There is no partial credit — you either meet the requirement or you don't.

Some vehicles that don't may have access to for the full $7,500 may still may have access to for a smaller amount. Check the IRS list of may have access to vehicles on their website or ask the dealership which credit amount applies to the specific model and year you're buying.

Claiming the credit on your tax return

To claim the credit, you file Form 8936 (may have access to Plug-in Electric Drive Motor Vehicle Credit) with your federal tax return. You'll need the vehicle identification number (VIN), the date you bought it, and the MSRP.

You can only claim the credit for the tax year in which you owned the vehicle for at least one day. If you buy the car in December, you can claim it on that year's return. If you buy it in January, you claim it the following year.

The credit reduces your federal income tax liability dollar-for-dollar. If you owe $5,000 in federal taxes and claim a $7,500 credit, your tax bill drops to $0. Depending on your tax situation, you may receive the extra $2,500 as a refund, but this is not may provide — it depends on whether you have other tax credits or deductions that affect your refund.

Point-of-sale credit: getting the discount at the dealership

Starting in 2024, some dealerships began offering the federal credit as a point-of-sale rebate. This means you see the discount applied to your purchase price when you buy the car, rather than waiting until you file your taxes the following year.

If you use the point-of-sale credit, you cannot claim the same credit again on your tax return. The dealership handles the paperwork with the IRS, and you receive the benefit when ready. This option is available only at participating dealerships and only for certain vehicles.

To use the point-of-sale credit, you still must meet the income and vehicle requirements. The dealership will verify your income before offering the discount. If you don't may have access to, you can still buy the car, but you won't receive the credit at purchase or on your tax return.

What happens if you sell the car or it's no longer new

The credit applies only to new vehicles. Once a car is sold to a second owner, it no longer qualifies for the federal credit, even if the new owner buys it within the same tax year.

If you buy a new electric car and sell it before filing your tax return, you can still claim the credit for the year you owned it — as long as you owned it for at least one day. However, if you sell it to someone else, that person cannot claim the credit.

Used electric vehicles do not may have access to for this federal credit. There is a separate used electric vehicle credit with different rules and a lower maximum amount, but it is not the same program.

Frequently Asked Questions

What if I buy the car but don't owe any federal income taxes?

If you don't owe federal taxes, you may still receive the credit as a refund, depending on your overall tax situation. The credit is refundable up to a certain amount under current rules, but the exact refund depends on your other income and deductions. A tax professional can tell you whether you'll receive a refund in your specific case.

Can I claim the credit if I lease an electric car instead of buying it?

No. The federal tax credit applies only to purchases. However, there is a separate leasing credit that may be available, though it works differently and has different rules. Ask your leasing company whether the vehicle qualifies for a leasing credit.

Do I have to claim the credit, or can I skip it?

You don't have to claim it. If you prefer not to, you can straightforward not file Form 8936 with your tax return. Some people skip it if they're concerned about audits or if they don't want to deal with the paperwork, though skipping it means losing the benefit.

What if the vehicle I want to buy isn't on the IRS list of may have access to vehicles?

The IRS publishes a list of vehicles that meet the requirements. If your vehicle isn't on it, it doesn't may have access to for the credit. You can check the IRS website or ask the dealership to confirm whether a specific model qualifies before you buy.

If I buy a car in 2024 but file my taxes late in 2025, which year do I claim the credit?

You claim it on the tax return for the year you bought the car. If you bought it in 2024, you claim it on your 2024 return, even if you file that return in 2025. The year of purchase is what matters, not the year you file.