By Kelley R. Taylor
Last updated 4 weeks ago
A federal EV tax credit is available under the Inflation Reduction Act (IRA) — a significant piece of legislation aimed at promoting clean energy. The credit can be as high as $7,500 for qualifying electric vehicles (EVs), also referred to as “clean vehicles.” This initiative is designed to encourage wider adoption of EVs; nevertheless, many consumers have questions regarding its implementation.
- Some buyers are concerned about eligibility due to income limits.
- Earlier this year, the Treasury and the IRS unveiled final rules for the federal electric vehicle tax credit, which aim to facilitate the transition to electric vehicles while addressing trade concerns.
- Recent changes to the EV tax credit rules have left some uncertainty regarding which electric vehicles will qualify for the full tax credit in the 2024 tax year (for taxes filed in early 2025).
- Political factors may also influence the outlook for the EV tax credit.
Despite these ambiguities, electric vehicle tax credits can offer significant benefits to eligible consumers. Here is some essential information to help navigate the latest EV credit changes and clarify which vehicles qualify — and why.
Overview of the EV Tax Credit
How Does the EV Tax Credit Work?
Below are some key points to understand regarding the federal electric vehicle tax credit:
Key Points:
- The EV tax credit is valid for a period of 10 years, expiring in December 2032.
- The tax credit amount is applied in the year when you take delivery of a qualifying clean vehicle.
- A credit of up to $7,500 exists for new vehicles, which considers factors like the vehicle’s sourcing and assembly (primarily in North America) and the date the vehicle was placed into service.
- Selected previously owned EVs may qualify for a tax credit of up to $4,000 or 30% of the sales price, whichever is lower.
- Starting January 1, 2024, consumers will be able to obtain the EV tax credit at the point of sale when purchasing the vehicle.
Income Limits for EV Tax Credit
Your modified adjusted gross income (MAGI) is crucial for determining eligibility for the qualifying new clean vehicle tax credit. It typically dictates your eligibility for various tax benefits and consists of your adjusted gross income with certain deductions or income exclusions included.
EV Tax Credit Income Limitations
Eligibility constraints are based on income levels, as outlined below:
| SINGLE | Modified AGI over $150,000 | Don’t qualify for the EV credit |
| MARRIED (Filing Jointly) | Modified AGI over $300,000 | Don’t qualify for the EV credit |
| HEAD OF HOUSEHOLD | Modified AGI over $225,000 | Don’t qualify for the EV credit |
| ALL OTHER FILERS | Modified AGI over $150,000 | Don’t qualify for the EV credit |
To summarize, make sure your modified adjusted gross income aligns with the specified limits to determine eligibility for the EV tax credit.
Qualifying Vehicles for the EV Tax Credit
When considering eligibility for the electric vehicle tax credit, it is critical to understand which vehicles meet the criteria.
Current Eligibility Status:
Generally, only a limited number of models qualify for the full $7,500 EV tax credit, while others may receive reduced amounts or no credit at all. Stricter regulations instituted last spring pose additional limitations based on essential battery and sourcing requirements.
Price Limits for New Vehicles
- Vans, pickup trucks, and SUVs with an MSRP above $80,000 won’t qualify for the credit.
- New clean cars must have an MSRP of no more than $55,000 to qualify.
- Previously owned vehicles qualify for the tax credit only if their sale price is $25,000 or less.
Detailed List of Requirements
A previously owned electric vehicle must fulfill the following conditions to qualify for the federal EV tax credit:
- The vehicle must be purchased for individual use and not for resale.
- The buyer should not be the original owner.
- The buyer must not be claimed as a dependent on anyone else’s tax return.
- Previous clean vehicle credits must not have been claimed in the three years before the purchase.
Understanding Battery and Sourcing Requirements
Vehicle eligibility is also tied to battery and sourcing stipulations. New guidelines from the IRS will further limit the number of EVs that qualify for the full $7,500 credit. Starting April 17, 2023, these requirements began influencing which vehicles remain eligible.
Tesla and Commercial Vehicles
Popular models, including various Tesla offerings, were eligible for the full tax credit during the 2023 tax year. Nonetheless, limitations may apply in 2024 for specific models. Similarly, Mullen Automotive acquired the status of an IRS “qualified manufacturer” of commercial EVs, allowing some models to qualify for substantial tax credits.
Claiming the EV Tax Credit
To benefit from the $7,500 EV tax credit, complete IRS Form 8936 when filing your federal income tax return, including your vehicle’s VIN.
Federal EV Charger Tax Credit
Moreover, if you are exploring electric vehicle charging options for your home, the IRA has reintroduced a tax credit for electric vehicle chargers. This “Alternative Fuel Refueling Property tax credit” extends through December 31, 2032.
Final Thoughts on EV Tax Credits
In summary, ensure that you remain informed about the evolving regulations surrounding the federal EV tax credit. Factors such as income limits and the specifications of qualified vehicles will determine the potential tax benefits available to you. Additional resources can assist you in understanding your options better.
