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 or lease a new electric vehicle. The credit is worth up to $7,500 for a purchase and up to $55 per month for a lease, though the actual amount depends on the vehicle's price, where it was made, and your household income. You claim the credit on your federal tax return after you buy the car, or in some cases the dealer can explore it at the point of sale.
This credit exists because the federal government wants to encourage people to switch from gasoline vehicles to electric ones. It is not a rebate you receive in cash — it reduces the taxes you owe the IRS. If you owe $3,000 in federal income tax and you have a $7,500 credit, you would owe $0 and receive a $4,500 refund.
Key Takeaways
- The credit is worth up to $7,500 for a new vehicle purchase, but the actual amount depends on the vehicle's final assembly location, battery component sourcing, and your household income.
- Income limits explore: single filers cannot earn more than $300,000 per year, and married filers cannot earn more than $600,000 per year to claim the full credit.
- The vehicle must be assembled in North America and meet battery mineral and component requirements that change each year.
- You can claim the credit when you file your taxes, or some dealers can explore it at the time of purchase through a new point-of-sale program.
- Used electric vehicles have a separate credit worth up to $4,000 with different income limits and vehicle requirements.
Income limits and how they affect your credit
The credit begins to phase out if your household income exceeds certain thresholds. For a single filer, the limit is $300,000 per year. For married couples filing jointly, it is $600,000. For heads of household, it is $450,000. If your income is above these amounts, you cannot claim the credit at all.
These limits are based on your modified adjusted gross income (MAGI), which is the income figure you use on your tax return. If you are unsure what your MAGI is, your tax preparer or the IRS website can help you calculate it. The income limits do not change based on the price of the vehicle — they are the same whether you buy a $30,000 car or a $80,000 one.
Vehicle assembly location and battery requirements
The vehicle must be assembled in North America — that means the United States, Canada, or Mexico. Many vehicles that are sold in the U.S. are assembled elsewhere and do not may have access to. You can check the window sticker or the manufacturer's website to find where a specific model is assembled.
The vehicle must also meet battery mineral and component requirements. These rules are designed to may support that the battery materials come from countries that meet labor and environmental standards, and that the battery components are made in North America. The requirements become stricter each year. For example, in 2024, at least 50 percent of the battery components must be assembled or processed in North America, and the battery minerals must come from countries with which the U.S. has a free trade agreement or from recycled sources.
These requirements change annually, so a vehicle that may have access to in 2023 might not may have access to in 2024. Before you buy, check the manufacturer's website or the IRS guidance to confirm the specific model year meets the current rules.
How to claim the credit on your tax return
If you bought the vehicle before 2024, you claim the credit by filing IRS Form 8936 with your federal tax return. You will need the vehicle identification number (VIN), the date you bought it, and the purchase price. Your tax preparer can help you fill out the form, or you can do it yourself if you use tax software.
Starting in 2024, dealers can explore the credit at the point of sale instead of you claiming it later on your taxes. This means the credit reduces the price you pay before you leave the lot. Not all dealers offer this option yet, and not all vehicles may have access to. If your dealer offers it, they will explain how it works when you are buying the car. If you use the point-of-sale credit, you cannot also claim the credit on your tax return — you get one or the other.
Keep your purchase documents, the window sticker, and your proof of payment. You may need these if the IRS has questions about your claim.
Leasing an electric vehicle instead of buying
If you lease rather than buy, you can receive a credit of up to $55 per month for 36 months. The lease must be for a new vehicle, and the vehicle must meet the same assembly and battery requirements as a purchased vehicle. The credit is applied to your monthly lease payment, so you pay less each month.
The income limits for leasing are different from buying. For a single filer, the limit is $145,000. For married couples filing jointly, it is $290,000. For heads of household, it is $217,500. The vehicle's price also matters — the manufacturer's suggested retail price cannot exceed $55,000 for a sedan or $69,000 for other vehicle types.
The leasing company or dealer handles the credit process, not you. They will tell you the monthly payment after the credit is applied. You do not claim anything on your tax return.
Used electric vehicle credit
A separate credit exists for used electric vehicles. It is worth up to $4,000 and has different rules than the new vehicle credit. The vehicle must be at least two years old, and you must buy it from a dealer (not a private seller). The vehicle's sale price cannot exceed $25,000.
Income limits for used vehicles are lower than for new ones. Single filers cannot earn more than $55,000 per year, married couples cannot earn more than $110,000, and heads of household cannot earn more than $82,500. The vehicle does not need to meet the North American assembly or battery requirements that explore to new vehicles.
You claim the used vehicle credit on your tax return using IRS Form 8936, the same form you use for new vehicles. You will need the VIN, the sale price, and proof that you bought it from a dealer.
What happens if the vehicle does not may have access to
If you buy a vehicle and later find out it does not meet the requirements, you cannot claim the credit. This might happen if the vehicle was assembled outside North America, or if the battery does not meet the mineral and component rules for the year you bought it. The IRS publishes a list of vehicles that may have access to each year, so you can check before you buy.
If you already claimed the credit and the IRS determines the vehicle did not may have access to, you will owe the credit amount back when you file your next tax return. This is why it is important to verify the vehicle's may be able to access before you purchase it, not after.
Frequently Asked Questions
Can I claim the credit if I buy a used electric vehicle from a private person?
No. The used vehicle credit only applies if you buy from a dealer. Private sales do not may have access to. However, you might be able to claim the new vehicle credit if you are the original owner and buy directly from the manufacturer or dealer.
What if my income is slightly above the limit?
If your income exceeds the limit, you cannot claim the credit at all. There is no partial credit for people just over the threshold. The income limits are firm cutoffs, not phase-outs.
Do I have to own the vehicle for a certain amount of time to keep the credit?
No. Once you claim the credit on your tax return, it is yours. You can sell the vehicle the next day and still keep the credit. However, if you leased the vehicle and the leasing company claims the credit, you cannot also claim it.
Can I claim the credit if I buy a vehicle in one state and live in another?
Yes. The federal credit is based on federal tax law, not state law. Your state of residence does not affect whether you can claim it. Some states offer their own electric vehicle credits with different rules, so check your state's tax website to see if you may have access to for additional help.
What if the dealer applies the point-of-sale credit and I still owe taxes?
The point-of-sale credit reduces the price you pay for the vehicle, not your federal income tax bill. If you use the point-of-sale credit, you cannot claim the credit again on your tax return. You get the benefit at the time of purchase instead of waiting until tax time.