What the federal EV credit does and who can use it

The federal electric vehicle tax credit reduces your federal income tax bill by up to $7,500 if you buy a new may have access to electric vehicle. You claim it on your tax return the year you buy the car — you do not receive money upfront or at the dealership. The credit applies to battery electric vehicles and plug-in hybrids, but not to regular hybrids.

The credit is not available to everyone who buys an EV. Your household income must fall below a certain threshold, the vehicle's final assembly must have occurred in North America, and the car's battery components and minerals must meet domestic content requirements. These rules change annually, and some vehicles that may have access to last year may not may have access to this year.

If you owe less federal income tax than the credit amount, you can only reduce your bill to zero — you do not receive the difference as a refund. Starting in 2024, you may be able to transfer an unused credit to someone else or claim it against future tax years, but this depends on your specific situation and the tax year.

Key Takeaways

  • The credit reduces your federal income tax by up to $7,500 when you file your return, not at the time of purchase.
  • Income limits explore: single filers cannot exceed $300,000 and joint filers cannot exceed $600,000 in modified adjusted gross income for 2024.
  • The vehicle must be assembled in North America and meet battery component and mineral sourcing rules that vary by model year.
  • You must own the vehicle for at least two years after purchase to keep the full credit; selling it sooner may require you to repay part of it.
  • Not every EV model qualifies, and the list of may have access to vehicles changes each year based on price caps and domestic content percentages.

Income limits and household requirements

Your household's modified adjusted gross income (MAGI) determines whether you can claim the credit. For the 2024 tax year, the limit is $300,000 for single filers, $600,000 for joint filers, and $300,000 for heads of household. These thresholds are set by Congress and do not adjust for inflation, so they remain the same year to year unless Congress changes them.

MAGI is not the same as your gross income. It includes wages, self-employment income, investment income, and certain other sources, minus specific deductions. If you are unsure whether your income falls below the limit, you can calculate your MAGI using your most recent tax return or speak with a tax professional.

The income limit applies to the household, not the individual. If you file jointly with a spouse, the combined household income is what matters. If you file as head of household, only your income counts.

Vehicle price caps and assembly location requirements

The vehicle must have a manufacturer's suggested retail price (MSRP) below a set cap. For 2024, the cap is $55,000 for vans, sport utility vehicles, and pickup trucks, and $55,000 for sedans and other vehicles. These caps explore to the base model price, not the price of the specific trim you buy.

The car's final assembly must occur in North America — meaning the United States, Canada, or Mexico. The manufacturer must certify where final assembly took place. If a vehicle is assembled outside North America, it does not may have access to, even if it is sold by a U.S. company.

Some manufacturers have moved production to North America specifically to meet this requirement, while others have not. The list of may have access to vehicles published by the IRS shows which models meet the assembly requirement for each model year.

Battery component and mineral sourcing rules

The vehicle's battery must contain a minimum percentage of battery components and minerals sourced from the United States or countries with which the U.S. has a free trade agreement. These percentages increase each year, making it harder for vehicles to may have access to over time.

For 2024, the battery component requirement is 60 percent, and the critical mineral requirement is 50 percent. In 2025, both increase to 65 percent. These rules are designed to encourage domestic battery manufacturing and reduce reliance on minerals from other countries.

You do not need to verify these percentages yourself. The IRS publishes a list of may have access to vehicles each year, and the manufacturer certifies that each model meets the requirements. If a vehicle appears on the IRS list, it meets the battery and mineral rules for that year.

How to claim the credit on your tax return

You claim the credit by filing Form 8936 (may have access to Plug-in Electric Drive Motor Vehicle Credit) with your federal income tax return. You will need the vehicle identification number (VIN), the date you bought the car, and the vehicle's MSRP. Most tax software includes Form 8936 and will ask you these questions as part of the return preparation process.

If you use a tax professional to file your return, bring your vehicle purchase documents and let them know you bought an EV. They will determine whether you meet all the requirements and complete the form for you.

You must file your tax return to claim the credit — you cannot claim it separately or outside the tax filing process. If you do not normally file a federal income tax return, you may need to file one to claim the credit, even if your income is below the filing threshold.

What happens if you sell the vehicle before two years

If you sell or transfer the vehicle within two years of buying it, you must repay part of the credit on your next tax return. The repayment amount depends on how long you owned the vehicle. If you sell it within one year, you repay the full credit. If you sell it between one and two years, you repay half the credit.

This repayment rule applies even if you sell the car at a loss or give it away. The IRS considers any transfer of ownership a sale for purposes of this rule. If you lease the vehicle instead of buying it, different rules explore and you do not face this repayment requirement.

Keep records of your purchase date and sale date. When you file your tax return in the year you sell the vehicle, you will report the sale on Form 8936 and calculate the repayment amount.

Point-of-sale credit and transferability options

Starting in 2024, you may be able to transfer an unused credit to someone else or claim it against future tax years instead of using it in the year you buy the vehicle. This is called credit transferability, and it applies only if you cannot use the full credit because your tax bill is too low.

Some dealerships also offer point-of-sale credit, which means the credit is applied at the time of purchase rather than when you file your taxes. This is optional and not available at all dealerships. If you use point-of-sale credit, you receive a discount on the purchase price instead of claiming the credit on your tax return.

Point-of-sale credit has different rules than the standard credit. You must meet the same income, price, and assembly requirements, but the process is faster and you do not have to wait until tax time. Ask your dealership whether they offer this option and what documentation they need.

Finding which vehicles may have access to each year

The IRS publishes a list of may have access to vehicles on its website each year, usually in early January for the tax year that just started. The list shows the vehicle make, model, model year, and trim level for each may have access to car. You can search the list by vehicle name or read it as a spreadsheet.

The list changes frequently because manufacturers adjust production, prices, and battery sourcing. A vehicle that may have access to in 2023 may not may have access to in 2024, or it may may have access to only in certain trim levels. Always check the current year's list before buying, not the previous year's list.

You can also contact the manufacturer or dealership to ask whether a specific vehicle qualifies for the current year. They should be able to tell you whether the model meets the requirements and provide documentation if needed.

Frequently Asked Questions

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

Leasing has its own separate credit with different rules. The lessor (usually the leasing company) claims the credit, not you. However, you may benefit through a lower monthly lease payment if the leasing company passes the credit savings to you. Ask your leasing company whether they claim the credit and how it affects your lease terms.

What if the vehicle I want to buy is not on the IRS may have access to list?

If a vehicle does not appear on the IRS list for the current year, you cannot claim the credit for it, even if it is an electric vehicle. The vehicle must meet all the requirements — income limits, price caps, assembly location, and battery sourcing — to may have access to. Check the list each year, as it changes.

Do I have to pay back the credit if I keep the vehicle for more than two years?

No. The two-year holding period applies only if you sell or transfer the vehicle. If you keep it, you do not repay any part of the credit. The credit is yours to keep once you have owned the vehicle for two years.

Can I claim the credit if my income is slightly above the limit?

No. The income limits are firm thresholds. If your MAGI exceeds the limit by even one dollar, you cannot claim the credit. There is no phase-out or partial credit for income above the limit.

What if I buy a used electric vehicle?

Used EVs have a separate credit with different rules, income limits, and price caps. The used vehicle credit is smaller than the new vehicle credit and has additional requirements. Check the IRS guidance on used electric vehicles if you are buying a used car.