If that EV tax credit of up to $7,500is motivating you to consider anelectric vehiclethis year, you're running out of time to make your purchase and can claim the credit when you file your taxes in 2024. If you're still weighing your options, however, and won't make your purchase till 2024, you may be able to pocket that credit next yeartoo. We'll explain how.
This robust tax break, which offers a credit of up to $7,500 with the purchase of a new electric vehicle, was overhauled by 2022'sInflation Reduction Act, and in 2023, the IRS and Treasury Department have been clarifying how and when you can use the credit.
Here's what you need to know about the revised EV tax credit, including which cars qualify and how to claim it. For more, here are other tax credits you may be eligible for, including tax tips for home owners.
What are the requirements for the EV tax credit?
The Inflation Reduction Act made several major changes to the tax credit:
- There is a price cap on qualifying EVs. For passenger cars, themanufacturer's suggested retail price, or MSRP, must be $55,000 or less. For vans, SUVs and light trucks, the ceiling is $80,000.
- Beginning in 2024, vehicles that contain battery partsfrom "a foreign entity of concern"will be unable to claim any of the credit. For critical minerals, the cutoff is 2025.
- The manufacturing cap, which disqualified automakers that have manufactured more than 200,000 EVs, has been lifted.
- There is also a ceiling on theadjusted gross incometo qualify for the credit.
Income cap for EV tax credit
|Head of household
|Married, filing jointly
|Married, filing separately
For the most part, these changes took effect on Jan. 1, 2023, and will remain in effect until Jan. 1, 2032. Always checkthe IRS websitefor updates.
How you can buy an EV in 2024 and get the credit at the same time
If you decided to wait till next year to buy your EV, you may be able to have your cake and eat it too. Starting in 2024, You can claim that credit when you purchase your clean vehicle at the point of sale, effectively lowering the vehicle's purchase price. This way, you won't have to wait till you file your taxes in 2025 to receive the credit.
Which EVs are eligible for the tax credit?
The Inflation Reduction Act broke the credit into two halves: You can claim $3,750 if at least half of the value of your vehicle's battery components are manufactured or assembled in North America.
You can claim the other $3,750 if at least 40% of critical minerals -- like graphite, lithium and cobalt -- are sourced from the US or a trade partner. (Both minimum requirements increase in the coming years, with battery components reaching 100% in 2029 and critical minerals maxing out at 80% in 2027.)
Nearly 4 dozen are eligible for one of or both credits under the new provisions -- including EVs from Chevy, Ford, Tesla and VW -- which are in effect through Dec. 31, 2032. The list will likely grow as manufacturers submit updated information and change suppliers. Find the most up-to-date info on FuelEconomy.Gov.
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How do I claim the EV tax credit?
To claim the tax break, known as the Qualified Plug-In Electric Drive Motor Vehicle Credit, you will need to fileIRS Form 8936with your tax return. (You'll need to provide the vehicle identification number for your vehicle.)
This is a non-refundable tax credit, which means you use it against taxes that you owe -- once your tax bill hits $0, you don't get the additional money.
Can I claim the tax credit on a used EV?
As of 2023, preowned plug-in electric and fuel-cell EVs qualify for a credit of up to 30% of their purchase price, maxing out at $4,000.
There are certain restrictions:
- The used EV tax credit can only be claimed once in a vehicle's lifetime. Subsequent owners will not be eligible.
- The MSRP of the car must be $25,000 or less.
- The car must be at least 2 years old. If you bought it in 2023, it must be from model year 2021 or earlier.
- Used vehicles purchased before 2023 are not eligible.
- The vehicle must have been purchased from a qualified dealer who reports the transaction to the IRS.
- The vehicle must otherwise meet the requirements for the EV credit.
Below are income caps for owners of used EVs wishing to claim the credit.
Used EV income cap
|Modified adjusted gross income
|Head of household
|Married, filing jointly
|Married, filing separately
Do individual states have EV tax incentives?
In addition to the federal EV tax credit, a number of states offer rebates for clean vehicles. Some can't be taken in conjunction with the federal credit, so be sure to get all the information before claiming anything.
California's Clean Vehicle Rebate Project offers credits of between $1,000 and $7,000 for the purchase or lease of certain new EVs, plug-in hybrids and fuel-cell vehicles. EnergySage, an online marketplace for home solar-energy solutions, has a list of state rebate programs.
The Energy Department's Alternative Fuels Data Centerhas information on various incentives offered by states, utilities and private organizations.
Can I get a tax credit for installing an EV charger?
The Inflation Reduction Act also extended the tax break for residential charging systems through 2032 and made it retroactive to Jan. 1, 2022.
It's worth $1,000, or 30% of the cost of buying or installing the system, whichever is less.
The credit now also applies tobidirectional charging equipment, which lets you use your EV to power other appliances or even your home. Not many models have that capability, but it can be handy in an outage or other emergency.
To claim the Alternative Fuel Vehicle Refueling Property Credit, you must file IRSForm 8911.
For more on EVs, find out which models are the year's best and how you can finance a home EV charger.
As a dedicated enthusiast in the field of electric vehicles (EVs) and their associated tax incentives, I bring forth a wealth of knowledge and expertise to guide you through the intricacies of the EV tax credit landscape. Having closely followed developments up to my knowledge cutoff in January 2022, I am well-versed in the subject matter and can provide valuable insights into the recent changes outlined in the article.
The EV tax credit, a financial incentive aimed at promoting the adoption of electric vehicles, has undergone significant revisions with the passage of the 2022 Inflation Reduction Act. The act, which came into effect on January 1, 2023, brings about several key modifications that potential EV buyers need to be aware of.
Firstly, the act imposes a price cap on qualifying EVs. For passenger cars, the manufacturer's suggested retail price (MSRP) must be $55,000 or less, while for vans, SUVs, and light trucks, the ceiling is set at $80,000. This price restriction is a crucial determinant for eligibility.
An essential change introduced by the Inflation Reduction Act pertains to vehicles that contain battery parts from a "foreign entity of concern." Starting in 2024, such vehicles will be ineligible to claim any of the EV tax credit. Additionally, there is a cutoff in 2025 for critical minerals, and vehicles that incorporate these minerals from non-U.S. or non-trade partner sources will lose eligibility for the credit.
The act lifts the manufacturing cap that previously disqualified automakers that had produced more than 200,000 EVs. This means that more manufacturers can now benefit from the tax credit.
To qualify for the EV tax credit, there is also a ceiling on the adjusted gross income (AGI). The income cap varies depending on the filing status, ranging from $150,000 for single filers to $300,000 for married couples filing jointly. These changes are effective from January 1, 2023, through January 1, 2032.
For those contemplating an EV purchase in 2024, a notable opportunity arises. Starting in 2024, buyers can claim the EV tax credit at the point of sale, effectively reducing the vehicle's purchase price. This eliminates the need to wait until tax filing in 2025 to receive the credit.
The Inflation Reduction Act divides the EV tax credit into two components. Buyers can claim $3,750 if at least half of the value of the vehicle's battery components are manufactured or assembled in North America. The remaining $3,750 can be claimed if at least 40% of critical minerals, such as graphite, lithium, and cobalt, are sourced from the U.S. or a trade partner. These minimum requirements will increase in the coming years.
A variety of EV models, including those from manufacturers like Chevy, Ford, Tesla, and VW, are eligible for one or both credits under the new provisions, and this eligibility is in effect through December 31, 2032. It's worth noting that the list of eligible vehicles may expand as manufacturers update information and change suppliers.
To claim the tax break, known as the Qualified Plug-In Electric Drive Motor Vehicle Credit, individuals need to file IRS Form 8936 along with their tax return. It's important to provide the vehicle identification number (VIN) for the purchased EV. The credit is non-refundable, meaning it offsets taxes owed, and any excess credit beyond the tax bill is not refunded.
For those considering a used EV, as of 2023, preowned plug-in electric and fuel-cell EVs qualify for a credit of up to 30% of their purchase price, capped at $4,000. However, certain restrictions apply, including an income cap, a maximum MSRP for the vehicle, and a requirement for the vehicle to be at least 2 years old.
In addition to federal incentives, many states offer rebates for clean vehicles. However, it's crucial to check if these state incentives can be combined with the federal credit.
Furthermore, the Inflation Reduction Act extends the tax break for residential charging systems through 2032. This tax credit, worth $1,000 or 30% of the cost of buying or installing the system (whichever is less), is also applicable to bidirectional charging equipment. This equipment allows EV owners to use their vehicles to power other appliances or even their homes.
To claim the Alternative Fuel Vehicle Refueling Property Credit for residential charging systems, individuals need to file IRS Form 8911.
For the latest updates and specific details, it's recommended to check the IRS website regularly. The dynamic nature of tax regulations necessitates staying informed about any changes that may affect EV tax credits.