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Electric vehicle tax credits, rebates and other incentives

As of January 1st, 2024, buyers are able to transfer the federal EV tax credit to a qualified dealer at the point of sale and effectively turn the credit into an immediate discount. See additional details at IRS.gov.
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  • EV Rebate

    Federal Credit

    $4,000
    Maximum Rebate

    Under the Inflation Reduction Act of 2022, the Internal Revenue Service (IRS) offers taxpayers a Used Clean Vehicle Tax Credit equal to 30% of the sale price up to a maximum credit of $4,000 for the purchase of a used plug-in electric or hydrogen fuel cell vehicle. Beginning January 1, 2024, Clean Vehicle Tax Credits may be initiated and approved at the point of sale at participating dealerships registered with the IRS. Dealers will be responsible for submitting Clean Vehicle Tax Credit information to the IRS. Buyers are advised to obtain a copy of an IRS "time of sale" report, confirming it was submitted successfully by the dealer.

    For the vehicle to qualify:

    • Price cannot exceed $25,000.
    • Need to verify the Vehicle Identification Number (VIN).
    • Must be at least two model years older than the current calendar year in which the vehicle was purchased.
    • Must be sold through a dealership, private sales not permitted.
    • Not have already been transferred after August 16, 2022, to a qualified buyer.

    For individuals to qualify:

    • Must meet income eligibility, depending on modified adjusted gross income (AGI) and tax filing status.
    • Must not be the first owner of the qualifying vehicle.
    • Has not been allowed a credit under this section for any sale during the 3-year period ending on the date of the sale of such vehicle.
    • Purchased for personal use, not a business, corporation or for resale.

    To learn more, visit https://www.irs.gov/credits-deductions/used-clean-vehicle-credit

    Program Provider
    Internal Revenue Service (IRS)
    Expiration Date
    01/01/2025
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    Federal EV Tax Credits Overview

    Shopping for an electric vehicle (EV) or a plug-in hybrid electric vehicle (PHEV)? According to the landmark Inflation Reduction Act of August 2022, you can get up to $7,500 in tax credits if you purchase an EV or a PHEV, but it very much depends on the make and model you're considering. We'll give you the highlights here and encourage you to visit our in-depth analysis of the Inflation Reduction Act for full details. Additional incentives may be provided at the state and local levels, but our purpose here is to summarize federal EV tax incentives, not state and local incentives.

    Federal EV Tax Credit Incentive #1: North American Final Assembly

    You can't get any EV tax credits or PHEV tax credits unless the vehicle was assembled in North America, full stop. In the short run, this leaves some automakers out in the cold, but the idea is to create a new incentive to build clean vehicles right here on our home turf. Notably, meeting this final assembly requirement doesn't automatically mean you get a tax credit -- it just gets your foot in the door. Provided that the vehicle is assembled in North America, it may qualify for federal tax credits if further conditions are met. Specifically, the maximum $7,500 federal EV tax credit is made up of two separate $3,750 credits, one targeting EV battery minerals and the other EV battery components.

    Federal EV Tax Credit Incentive #2: Origin of Critical Battery Minerals ($3,750 Tax Credit)

    As with vehicle assembly, the U.S. government also wants to move the sourcing of critical battery minerals closer to home, at least in terms of trade partnerships. To this end, increasing percentages of critical EV battery minerals must be sourced from the U.S. itself or a U.S. free-trade partner, starting with 40% for 2023. The minimum percentage escalates quickly to 80% by 2027. Unless the EV or PHEV you purchase meets this requirement, you won't have access to at least half of the $7,500 maximum federal EV tax credit.

    Federal EV Tax Credit Incentive #3: Origin of Battery Components ($3,750 Tax Credit)

    Moving back to the assembly side, the U.S. likewise wants to incentivize the production of battery components at home or in free-trade partner countries. To enable this half of the $7,500 maximum tax credit for 2023, at least 50% of your vehicle's battery components must have been produced in the U.S. or in countries that have free-trade agreements with the U.S. Note that the minimum threshold escalates steadily to a full 100% by 2029, whereas the previous requirement regarding battery minerals stops (for now) at 80% in 2027.

    Federal EV Tax Credit Incentive #4: No Involvement by Blacklisted Countries After 2023

    Here's another one that's just about getting your foot in the door. In a not-so-subtle shot at China, which jumped out to a big lead in the EV battery business, the U.S. government has stipulated that once the calendar year flips to 2024, the EV or PHEV you purchase won't qualify for federal EV tax credits if any battery components came from a "foreign entity of concern," a short list that includes China, Russia, Iran and North Korea. For 2025, the stipulation will extend to critical battery minerals. Here again we can expect some short-term pain for automakers as they pivot from dependence on Chinese suppliers, but the financial incentives pushing that pivot are strong.

    Federal EV Tax Credit Incentive #5: Price Limits

    We use the plural because it depends on the type of vehicle you're considering. If it's an SUV, van, or pickup truck, it can't cost more than $80,000 or else it's not eligible for federal EV tax credits. For all other vehicle types, the eligibility limit drops to $55,000. The point of this incentive is to stimulate production of relatively affordable EVs as opposed to ultra-luxury models.

    Federal EV Tax Credit Incentive #6: Buyer Income Limits

    Finally, there's the question of how much money the buyer makes. Clearly the government wants to incentivize EV purchases within the middle class, because if you file your taxes as an individual, you won't qualify for federal EV tax credits unless you have a modified gross adjusted income (MAGI) of less than $150,000. If you file as head of household, that limit increases to $225,000, while joint filers can have a combined MAGI of up to $300,000.

    FAQ

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