The EV tax credit cuts your federal income tax by up to $7,500 when you buy a new electric vehicle

The federal electric vehicle tax credit is a dollar-for-dollar reduction in the income tax you owe to the IRS. If you buy a new battery electric vehicle or plug-in hybrid that meets the program's requirements, you can claim up to $7,500 on your tax return. The credit applies to vehicles purchased after December 31, 2022, and the amount you receive depends on the vehicle's final assembly location, the battery components' origin, and your household income.

This is not a rebate you receive at the dealership. You claim it on your tax return when you file, either in the year you bought the vehicle or, in some cases, at the point of sale if the dealer is registered with the IRS to transfer the credit directly to you. The credit reduces your tax liability dollar-for-dollar, which means if you owe $5,000 in federal income tax and you claim a $7,500 EV credit, your tax bill drops to zero and you may receive a refund of the remaining $2,500.

Key Takeaways

  • The credit is worth up to $7,500 but the actual amount depends on where the vehicle was assembled and where its battery components came from.
  • You must have purchased a new vehicle after December 31, 2022, and your household income must fall below $300,000 (married filing jointly) or $150,000 (single filers) to claim the full credit.
  • You can claim the credit on your tax return the year you bought the vehicle, or transfer it to the dealer at the point of sale if the dealer participates in the IRS program.
  • Not all electric vehicles may have access to — the vehicle must meet battery component and assembly location requirements that change based on trade agreements and domestic sourcing rules.
  • If you claim the credit at the dealer, you cannot claim it again on your tax return, and you must report the transfer on your return even though you did not receive the money.

Income limits that reduce or eliminate your credit

Your household income determines whether you can claim the full $7,500 credit, a reduced amount, or no credit at all. The IRS uses Modified Adjusted Gross Income (MAGI) — which is your adjusted gross income with certain deductions added back — to measure this. For the 2024 tax year, the income thresholds are $300,000 for married couples filing jointly, $150,000 for single filers, and $240,000 for heads of household.

If your income exceeds these limits, the credit phases out by $50 for every $1,000 over the threshold. For example, if you are a single filer with $160,000 in MAGI, you are $10,000 over the $150,000 limit. That $10,000 reduces your credit by $500 (10 × $50), leaving you with a $7,000 credit instead of $7,500. If your income is $200,000 as a single filer, you are $50,000 over the limit, which eliminates the credit entirely.

These income limits explore to the tax year in which you bought the vehicle. If you bought the vehicle in 2024, you use your 2024 income to determine your credit. The IRS does not adjust these thresholds for inflation year to year, so the limits remain the same unless Congress changes the law.

Vehicle assembly location and battery component requirements

Not every electric vehicle qualifies for the full $7,500 credit. The law requires that the vehicle be finally assembled in North America — which means the last substantial assembly must occur in the United States, Canada, or Mexico. If a vehicle is assembled in another country and only imported to the U.S., it does not may have access to for the credit.

The battery components requirement is more complex. The law sets a minimum percentage of battery components that must come from North America or from countries with which the U.S. has a free trade agreement. This percentage increases each year. For 2024, at least 50 percent of battery components by value must meet this sourcing requirement. The percentage will increase to 60 percent in 2025 and continue rising in future years.

Additionally, the vehicle's battery cannot contain more than a certain percentage of battery minerals — such as lithium, cobalt, nickel, and manganese — that come from countries of concern, as defined by the U.S. Department of Energy. This percentage also tightens each year. The IRS publishes a list of vehicles that meet these requirements each model year, and you can check whether your specific vehicle qualifies before you buy.

Claiming the credit on your tax return

To claim the EV credit on your tax return, you file Form 8936 (may have access to Plug-in Electric Drive Motor Vehicle Credit) along with your Form 1040. You will need the vehicle's identification number (VIN), the date you bought it, and the total purchase price. You also need to confirm that the vehicle meets the assembly and battery component requirements — the IRS website maintains a searchable list of may have access to vehicles by model year and manufacturer.

On Form 8936, you enter the vehicle's VIN in Part I and indicate whether it is a battery electric vehicle or a plug-in hybrid. You then calculate the credit amount based on the vehicle's battery capacity and whether it meets the domestic content requirements. The form walks you through this calculation, but the basic rule is that vehicles with larger batteries and higher domestic content receive larger credits.

You attach Form 8936 to your Form 1040 when you file your return. The credit reduces your tax liability on line 24 of Form 1040. If the credit exceeds your tax liability, you may receive a refund of the excess amount, though there are limits on how much of the credit can be refundable in certain situations.

Transferring the credit to the dealer at the point of sale

Starting in 2024, you have the option to transfer the EV credit directly to the dealer instead of claiming it on your tax return. This means the dealer receives the credit amount and reduces your purchase price at the time of sale. You do not have to wait until you file your taxes to benefit from the credit.

To use this option, the dealer must be registered with the IRS as a participating dealer. Not all dealers participate, so you need to ask whether your dealer offers this service. If they do, you will fill out a form at the dealership that authorizes the transfer. The dealer then claims the credit from the IRS and applies it to your vehicle purchase.

If you transfer the credit to the dealer, you cannot claim it again on your tax return. However, you must still report the transfer on your return using Form 8936, even though you did not receive the money directly. This tells the IRS that you already received the benefit of the credit and are not claiming it a second time. Failing to report the transfer can result in penalties and interest.

Plug-in hybrids versus battery electric vehicles

Both battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs) can may have access to for the credit, but the credit amounts and requirements differ slightly. A battery electric vehicle runs entirely on electricity and has no gasoline engine. A plug-in hybrid has both an electric motor and a gasoline engine and can run on either power source.

For battery electric vehicles, the credit is based primarily on battery capacity and domestic content. For plug-in hybrids, the credit is capped at $3,750 and depends on the vehicle's battery capacity and whether it meets the domestic content requirements. A plug-in hybrid with a smaller battery may may have access to for only $1,875 or less.

Both types of vehicles must be newly manufactured and purchased after December 31, 2022. Used electric vehicles have a separate credit program with different rules and a lower maximum amount of $4,000. If you are buying a used EV, you will use different forms and different income limits.

What happens if you buy a used electric vehicle

The EV tax credit also covers used electric vehicles, but the rules are different from new vehicles. The used EV credit has a maximum of $4,000, and the income limits are lower: $55,000 for single filers, $110,000 for married couples filing jointly, and $82,500 for heads of household. The vehicle must be at least two years old and purchased from a licensed dealer, not from a private seller.

You claim the used EV credit on Form 8936 as well, but you use Part II of the form instead of Part I. You will need the vehicle's VIN, the purchase price, and the dealer's name and address. The used EV credit is not transferable to the dealer at the point of sale — you can only claim it on your tax return.

Frequently Asked Questions

Can I claim the EV credit if I lease the vehicle instead of buying it?

No, the federal EV credit applies only to purchases. If you lease an electric vehicle, the leasing company may claim the credit, and that benefit may be reflected in your lease payment. You cannot claim the credit yourself on your tax return.

What if the vehicle I bought does not appear on the IRS list of may have access to vehicles?

If your vehicle is not on the IRS's list, it does not meet the assembly location or battery component requirements for that model year. You cannot claim the credit. Check the IRS website before you buy to confirm your specific vehicle qualifies.

Do I have to file a tax return to claim the EV credit?

If you claim the credit on your tax return, yes, you must file a return. However, if you transfer the credit to the dealer at the point of sale, you still must file a return to report the transfer, even if you would not otherwise be required to file.

Can I claim the credit if I bought the vehicle before 2023?

No, the current EV credit rules explore only to vehicles purchased after December 31, 2022. Vehicles purchased before that date may have may have access to for an older version of the credit with different rules.

What if my income changes after I buy the vehicle?

Your income in the tax year you bought the vehicle determines your credit amount. If your income changes in a later year, it does not affect the credit you already claimed. You use the income from the year of purchase only.