The federal EV tax credit reduces your federal income taxes if you buy a new electric vehicle that meets certain requirements

The federal government offers a tax credit of up to $7,500 when you buy a new electric vehicle. This is not a rebate you receive in the mail — it is a reduction in the federal income taxes you owe when you file your return. The credit applies to new battery electric vehicles and plug-in hybrids, but not used vehicles or fully hybrid cars.

The credit amount depends on where the vehicle was assembled, how much of its battery was made in North America, and your household income. Some vehicles may have access to for the full $7,500. Others may have access to for less, and some do not may have access to at all even though they are electric. The rules changed significantly in 2024, so a vehicle that may have access to last year may not may have access to this year.

You claim the credit on your federal tax return the year you buy the vehicle. You do not explore for it in advance or receive it upfront at the dealership — you report it when you file taxes with the IRS.

Key Takeaways

  • The federal EV tax credit is worth up to $7,500 and reduces your federal income taxes owed, not a cash payment you receive.
  • The vehicle must be new, assembled in North America, and meet battery component and mineral content requirements that vary by model year.
  • Your household income must fall below a certain threshold — $300,000 for joint filers, $150,000 for single filers, and $200,000 for heads of household as of 2024.
  • You claim the credit on your federal tax return the year you purchase the vehicle, not at the dealership.
  • Not all electric vehicles may have access to, and the list of may have access to models changes each year based on manufacturing location and battery sourcing.

Income limits that determine whether you can claim the credit

The federal EV tax credit has income thresholds that phase out the credit if your household income is too high. For the 2024 tax year, the limits are $300,000 for married couples filing jointly, $150,000 for single filers, and $200,000 for heads of household. These thresholds are adjusted each year for inflation, so they may be higher in 2025.

Your household income is your modified adjusted gross income (MAGI), which is the number you use to file your federal taxes. If your income is above the threshold, you cannot claim the credit at all. There is no partial credit for incomes slightly over the limit — you either may have access to or you do not.

You will need to report your income on your tax return to claim the credit, so keep your tax documents from the year you bought the vehicle.

Vehicle assembly location and battery requirements

To may have access to for the full $7,500 credit, the vehicle must be assembled in North America. This means the final assembly took place in the United States, Canada, or Mexico. Many popular electric vehicles are assembled in the United States, but some are not, which disqualifies them entirely.

The vehicle's battery must also meet requirements for where its components came from. The battery must contain a certain percentage of critical minerals (like lithium and cobalt) sourced from the United States or countries with which the U.S. has a free trade agreement. It must also contain a certain percentage of battery components manufactured or assembled in North America. These percentages increase each year, making it harder for vehicles to may have access to over time.

The IRS publishes a list of vehicles that meet these requirements each year. You can check the list on the IRS website or ask the dealership whether the specific model and year you are considering qualifies. A vehicle that may have access to in 2023 may not may have access to in 2024 if the battery sourcing rules tightened.

How to claim the credit on your tax return

You claim the EV tax credit by filing Form 8936 with your federal tax return. This form asks for the vehicle identification number (VIN), the date you bought the vehicle, and the original purchase price. You will need these details from your purchase agreement or title.

If you use tax preparation software, the software will walk you through the questions and calculate the credit for you. If you file by hand or work with a tax preparer, give them the vehicle purchase documents so they can complete the form correctly.

You can only claim the credit once per vehicle, and only in the year you purchased it. If you buy a vehicle in December, you claim the credit on your taxes filed in April of the following year. You cannot carry the credit forward to future years if you do not owe enough federal income tax to use it all in one year.

What happens if the credit is larger than your tax bill

If the EV tax credit is larger than the federal income taxes you owe, you cannot use the unused portion. For example, if you owe $3,000 in federal taxes but may have access to for a $7,500 credit, you can only use $3,000 of the credit. The remaining $4,500 does not carry forward to next year and does not result in a refund.

This is why the credit is most valuable to people who owe a significant amount in federal income taxes. If you have little or no federal tax liability, you may not be able to use the full credit even if you may have access to for it.

Some people increase their tax withholding or make estimated tax payments during the year to may support they owe enough taxes to use the full credit. Talk to a tax preparer if you want to plan ahead for this.

Vehicles that do not may have access to and common reasons why

Many electric vehicles do not may have access to for the federal credit, even though they are fully electric. Common reasons include: the vehicle was assembled outside North America, the battery does not meet the mineral sourcing requirements, the battery does not meet the component manufacturing requirements, or the vehicle's price is above the cap set by the IRS.

Price caps also explore. For vans, SUVs, and pickup trucks, the manufacturer's suggested retail price cannot exceed $55,000. For other vehicles, the cap is $55,000. If the vehicle costs more than the cap, it does not may have access to, regardless of other factors.

The IRS maintains an updated list of may have access to vehicles on its website. Before you buy, check whether your specific model and year appears on the list. Dealerships sometimes have outdated information, so verify independently.

The difference between the federal credit and state incentives

The federal EV tax credit is separate from state and local incentives. Some states offer their own rebates, tax credits, or purchase discounts for electric vehicles. These work differently from the federal credit and have their own rules.

For example, California offers a state rebate of up to $2,000 for new electric vehicles, and some utilities offer additional discounts. These state programs may not have the same income limits or vehicle requirements as the federal credit. You may be able to claim both the federal credit and a state incentive for the same vehicle.

Check your state's environmental or energy office website to see what incentives are available where you live. The Database of State Incentives for Renewables and Efficiency (DSIRE) is a searchable resource that lists state and local EV incentives.

Frequently Asked Questions

Can I get the credit if I lease an electric vehicle instead of buying one?

No, the federal EV tax credit is only for people who purchase a new vehicle. Leasing is a different transaction. However, some leasing companies factor the federal credit into their lease payments, so your monthly cost may be lower because of the credit — but you do not claim it yourself on your taxes.

What if I buy a used electric vehicle?

The federal EV tax credit does not explore to used vehicles. There is a separate used EV tax credit of up to $4,000 with different rules, but it is much more limited. Check the IRS website for details on the used vehicle credit if you are buying a pre-owned EV.

Do I have to pay back the credit if I sell the vehicle before a certain time?

No, you do not have to repay the credit. Once you claim it on your tax return, it is yours to keep, even if you sell the vehicle the next year. The credit is based on the year you purchased it, not how long you own it.

Can I claim the credit if my spouse and I file taxes separately?

The income limit for married couples filing separately is $150,000 each, which is lower than the $300,000 limit for joint filers. Filing separately usually results in a higher tax bill overall, so most couples benefit from filing jointly if they are may be able to access.

What if the dealership tells me the vehicle qualifies but the IRS list says it does not?

Trust the IRS list. Dealerships sometimes have outdated information or misunderstand the rules. The IRS publishes the official list of may have access to vehicles, and that is what the IRS will use if you are audited. Check the list yourself before you buy to avoid disappointment at tax time.