What the EV tax credit does and who can claim it

The federal electric vehicle tax credit reduces your federal income tax bill by up to $7,500 if you buy a new may have access to electric vehicle. The credit is not a rebate you get at the dealership — you claim it on your tax return when you file for that year. The IRS subtracts the credit amount from the taxes you owe, dollar for dollar.

You must own the vehicle (leasing does not count), buy it new from a dealer, and meet income and vehicle price limits. The credit phases out if your household income exceeds certain thresholds, and the vehicle itself must meet domestic content and mineral requirements set by the Treasury Department.

The credit amount varies. A new battery electric vehicle can be worth up to $7,500. A plug-in hybrid electric vehicle (PHEV) can be worth up to $4,000. Some vehicles may have access to for less, and some do not may have access to at all, depending on where they were assembled and what minerals went into the battery.

Key Takeaways

  • The credit reduces your federal tax bill by up to $7,500 for a new battery electric vehicle or up to $4,000 for a plug-in hybrid, claimed when you file your tax return.
  • Your household income must be below $300,000 (married filing jointly), $150,000 (single), or $240,000 (head of household) to claim any credit.
  • The vehicle must be assembled in North America and meet battery mineral sourcing rules that change each year — not all new EVs may have access to.
  • You claim the credit on Form 8936 when you file taxes for the year you bought the vehicle, and you must have a tax bill large enough to use the full amount.
  • Starting in 2024, you can transfer an unused credit to the dealership at purchase instead of waiting until tax time, though this option is not available at all dealerships.

Income limits that reduce or eliminate the credit

The credit begins to phase out if your household income exceeds $300,000 (if you file married filing jointly), $150,000 (if you file single), or $240,000 (if you file head of household). The income limit is based on your modified adjusted gross income for the tax year in which you bought the vehicle.

Once your income crosses the threshold, the credit shrinks by $50 for every $1,000 over the limit. If your income is $5,000 over the threshold, you lose $250 of the credit. If you are $150,000 over, the credit disappears entirely. This means a single filer earning $300,000 gets no credit at all.

You report your household income on your tax return, so the IRS will verify it when you claim the credit. If your income changes during the year — for example, you sell a business or receive a large bonus — that affects your may be able to access for the full credit.

Vehicle assembly and battery mineral requirements

The vehicle must be assembled in North America — this means the final assembly plant must be in the United States, Canada, or Mexico. A vehicle designed in the U.S. but assembled in Japan or Germany does not count. The Treasury Department publishes a list of may have access to vehicles each year, and it changes as manufacturers move production or retool plants.

The battery must also meet mineral sourcing rules. Starting in 2024, a certain percentage of battery minerals (cobalt, lithium, manganese, nickel) must come from the United States, free trade agreement countries, or be recycled. The percentage requirement increases each year. A vehicle that may have access to in 2023 might not may have access to in 2024 if the battery sourcing rules tightened.

Check the Treasury Department's list of may have access to vehicles before you buy. The list includes the model year, trim level, and sometimes specific production dates. A Tesla Model 3 made in Texas qualifies, but a Tesla Model 3 made in China does not, even if sold in the U.S.

How to claim the credit on your tax return

You claim the credit using Form 8936 (may have access to Plug-in Electric Drive Motor Vehicle Credit), which you attach to your federal tax return. The form asks for the vehicle identification number (VIN), the date you bought it, and the original selling price. You will need your purchase documents from the dealership.

The credit reduces your tax bill line by line. If you owe $5,000 in federal income tax and you claim a $7,500 credit, your bill drops to zero and you do not get the extra $2,500 back (unless you have other credits or income that creates a refund). This is called a non-refundable credit — you can only use it to reduce taxes you actually owe.

If you did not have enough tax liability to use the full credit in the year you bought the vehicle, you cannot carry the unused amount forward to the next year. This is why a person with very low income or no tax bill might not benefit from the full credit, even if they bought a may have access to vehicle.

The point-of-sale credit transfer option

Starting in 2024, you can transfer an unused credit to the dealership at the time of purchase instead of waiting to claim it on your tax return. This is called the point-of-sale credit transfer. The dealership applies the credit as a discount on the vehicle price, and you get the benefit immediately rather than months later at tax time.

Not all dealerships offer this option yet. You have to ask the dealer whether they participate in the program. If they do, they will handle the paperwork with the IRS. If they do not, you claim the credit the traditional way on your tax return.

The point-of-sale transfer is useful if you have little or no tax liability in the year you buy the vehicle. Instead of losing the credit because you do not owe enough tax, you get a discount at purchase. However, you still have to meet all the other rules: income limits, vehicle assembly requirements, and mineral sourcing standards.

Vehicles that do not may have access to

Used vehicles do not count — the vehicle must be new and purchased from a dealer. If you buy a used EV from a private seller or a used car lot, you cannot claim the credit.

Leased vehicles do not count either. If you lease an EV, the leasing company may be able to claim a credit, but you cannot. Some manufacturers offer lease deals that factor in the credit, but the credit itself goes to the lessor, not to you.

Vehicles assembled outside North America do not count, even if they are sold by a U.S. dealer. Vehicles that exceed the price cap (which varies by vehicle type and ranges from roughly $55,000 to $80,000 for new vehicles) do not count. And vehicles that do not meet the battery mineral sourcing percentage for that year do not count, even if they may have access to the year before.

What to bring to the dealership and what to keep

Bring a photo ID and proof of income (recent pay stubs, tax return, or W-2) if you are using the point-of-sale credit transfer. The dealership will need to verify your household income before they can apply the credit as a discount.

Keep your purchase agreement, the vehicle title, and the bill of sale. When you file your tax return, you will need the VIN and the original selling price. If you claim the credit and the IRS audits your return, you will need to show these documents to prove you bought a new may have access to vehicle in that tax year.

If you use the point-of-sale transfer, keep the paperwork the dealership gives you showing the credit was applied. This documents that you used the credit and prevents you from claiming it again on your tax return.

Frequently Asked Questions

Can I claim the credit if I buy a used EV?

No. The federal credit is only for new vehicles purchased from a dealer. Used EVs do not count, even if they are only a few years old. Some states offer separate credits for used EV purchases, but the federal credit requires a new vehicle.

What if the vehicle I want to buy is not on the Treasury list?

You cannot claim the credit for that vehicle. Check the Treasury Department's list of may have access to vehicles before you buy. If the model you want is not listed, or if it is listed but your trim level or production date is not, the credit does not apply. Contact the dealership to ask whether they expect the vehicle to be added to the list soon.

Do I have to claim the credit, or can I skip it?

You do not have to claim it. If you have very low income and the credit would be wasted because you have no tax bill, you might choose not to claim it. However, most people benefit from claiming it, so there is no reason to skip it if you meet the rules.

What happens if I sell the vehicle before I file my tax return?

You can still claim the credit in the year you bought it. The credit is based on the purchase date, not on how long you own the vehicle. Sell it the next day if you want — you still get the credit when you file taxes for that year.

Can I claim the credit if my spouse bought the vehicle but we file taxes jointly?

Yes. The income limit is based on household income, so it does not matter whose name is on the title. If you file married filing jointly and your combined household income is below $300,000, you both meet the income test. Only one of you claims the credit on the return, but the household income is what matters.