Federal tax credits reduce what you owe on your taxes if you buy or lease a new electric vehicle
The federal government offers a tax credit of up to $7,500 when you purchase a new electric car, and up to $4,000 when you lease one. The credit comes as a reduction in your federal income tax bill — you do not receive it as a separate payment. The amount you receive depends on the vehicle's price, where it was assembled, the battery components used, and your household income.
Starting in 2024, you can claim the credit on your tax return for the year you bought or leased the vehicle. Some dealerships now offer the credit at the point of sale instead, meaning you pay less upfront rather than waiting until tax time. Both routes lead to the same total savings, but the timing differs.
Key Takeaways
- The federal electric vehicle tax credit is up to $7,500 for new purchases and up to $4,000 for leases, claimed when you file your taxes or sometimes at the dealership.
- Your household income must fall below certain thresholds — $300,000 for joint filers, $150,000 for single filers, and $200,000 for heads of household — to claim the full credit.
- The vehicle must meet assembly and battery component requirements, and many used electric cars also may have access to for a separate credit of up to $4,000.
- Some states offer their own electric vehicle tax credits or rebates on top of the federal credit, so check your state's environmental or energy office.
How the federal credit works for new electric vehicles
When you buy a new electric car, you can claim a credit of up to $7,500 on your federal tax return. The actual amount depends on four things: the vehicle's final assembly location, the percentage of battery components sourced from approved countries, the percentage of critical minerals in the battery that meet sourcing rules, and your household income.
The vehicle must be assembled in North America to may have access to. If it was built outside North America, you cannot claim the credit. The battery component and critical mineral requirements are technical and change year to year, so the manufacturer's website or the IRS website will list which specific models and model years meet the rules.
Your household income determines whether you can claim the full $7,500 or a reduced amount. If you file taxes jointly with a spouse, your combined income must be below $300,000. If you file as a single person, your income must be below $150,000. If you file as head of household, your income must be below $200,000. If your income exceeds these thresholds, you cannot claim the credit at all.
Claiming the credit at tax time versus at the dealership
Traditionally, you claimed the electric vehicle credit when you filed your federal tax return in the year after you bought the car. You would report the purchase on Form 8936 and reduce your tax bill by the credit amount.
Since 2024, many dealerships can offer the credit at the point of sale instead. When you buy the car, the dealer applies the credit to reduce your purchase price before you leave the lot. You still need to meet all the income and vehicle requirements, and you will report the transaction on your tax return, but you see the savings when ready rather than waiting months for a tax refund.
Not all dealerships participate in the point-of-sale program yet, and not all vehicles are may be able to access for it. Ask your dealer whether they offer it before you buy. If they do not, you can still claim the credit on your tax return the following year.
Tax credits for leasing an electric vehicle
If you lease rather than buy an electric car, you can claim a credit of up to $4,000. The credit applies to the lease agreement itself, not to you as the individual — the leasing company typically claims it and passes the savings to you through a lower monthly payment.
The vehicle must still meet the same assembly and battery component requirements as purchase credits. Your household income must also fall below the same thresholds: $300,000 for joint filers, $150,000 for single filers, and $200,000 for heads of household.
The lease term must be at least 24 months, and the vehicle's manufacturer's suggested retail price cannot exceed certain limits, which vary by vehicle class. Check the IRS website or the manufacturer's details to confirm your lease qualifies before you sign the agreement.
Used electric vehicle credits and state programs
You can also claim a tax credit of up to $4,000 when you buy a used electric car, though the rules are different from new vehicle credits. The vehicle must be at least two years old, and its sale price cannot exceed $25,000. Your household income must be below $55,000 if you file as a single person, $110,000 if you file jointly, or $82,500 if you file as head of household.
Many states offer their own electric vehicle tax credits, rebates, or purchase discounts on top of the federal credit. Some states provide additional money at the point of sale, while others offer credits on your state tax return. Contact your state's environmental agency, energy office, or department of revenue to learn what programs exist in your state and whether you meet the requirements.
What happens if you sell the car before paying off the loan
If you claimed the federal tax credit when you bought the car and later sell it before the loan is paid off, you do not have to repay the credit. The credit is yours once you claim it on your tax return.
The only exception is if you claimed the credit at the point of sale through the dealer program and then sell the car within a certain time frame. The rules for this situation are still being clarified by the IRS, so ask your dealer about any restrictions when you purchase.
How to report the credit on your tax return
To claim the credit on your federal tax return, you will use Form 8936, which is filed along with your Form 1040. The form asks for the vehicle identification number, the date you bought or leased the vehicle, and the sale price or lease terms. You will also need to confirm that the vehicle meets the assembly and battery requirements — the manufacturer or dealer can provide this information.
If you claimed the credit at the point of sale through your dealer, you will still report it on Form 8936 to document the transaction, but you will not be claiming an additional credit amount since you already received the savings.
If you use tax preparation software or work with a tax professional, they can help you complete the form. The IRS website has a list of vehicles that meet the requirements, which you can check before you file.
Frequently Asked Questions
Can I claim the credit if I buy a used electric car from a private person instead of a dealer?
Yes, you can claim the used electric vehicle credit of up to $4,000 when you buy from a private seller, as long as the car is at least two years old and costs no more than $25,000. You will report it on Form 8936 when you file your taxes. The income limits are lower for used vehicles than for new ones.
What if the vehicle I want does not meet the battery or assembly requirements?
You cannot claim the federal credit for that vehicle. Check the IRS website or the manufacturer's information before you buy to confirm the specific model and year meet the rules. Some vehicles that may have access to in previous years may not may have access to in the current year due to changing battery sourcing requirements.
Do I have to own the car for a certain amount of time after buying it to keep the credit?
There is no minimum ownership period for the new vehicle purchase credit. Once you claim it on your tax return, it is yours. For the point-of-sale credit, the rules are still being finalized by the IRS, so ask your dealer if there are any restrictions.
Can I claim both the federal credit and a state credit for the same car?
Yes, in most states you can claim both the federal tax credit and your state's credit or rebate for the same vehicle. The programs are separate. Check your state's rules to confirm, since a few states may have different limits or restrictions.
What if my income changes after I buy the car — do I have to repay the credit?
No. The credit is based on your income in the year you bought the vehicle. If your income changes in later years, it does not affect the credit you already claimed.