Beginning in 2008, taxpayers have the option to claim electric vehicle (EV) tax credits if they purchase a new or used electric vehicle and meet several criteria. The credit was created as a financial incentive to consumers to purchase electric vehicles.
How to Claim Them
The Clean Vehicle Tax Credit can be applied to new EVs and used EVs.
Eligibility for New EVs (up to $7,500 credit)
Income Limit:
- Individuals: Max $150,000 AGI
- Heads of Household: Max $225,000 AGI
- Joint Filers: Max $300,000 AGI
Vehicle Price Limits
The vehicles manufacturer suggested retail price cannot exceed:
- SUVs, trucks, vans: Max price $80,000
- Sedans and other vehicles: Max $55,000
Battery & Manufacturing Requirements:
- Battery parts must be from North America or an approved trade partner
- Final assembly must occur in North America
- Gross weight rating under 14,000 pounds
Eligibility for Used EVs (up to $4,000 credit)
Income Limit:
- Individuals: Max $75,000 AGI
- Heads of Household: Max $112,500 AGI
- Joint Filers: Max $150,000 AGI
Vehicle Price Limit: $25,000
Other Requirements:
- Must be purchased from a dealership
- Must be at least 2 years old
How to Apply for the EV Credit
At the time of sale, the dealer provides a time-of-sale report to show that the dealer completed their IRS reporting. The credit is then claimed on your federal income tax return (Form 1040) by completing Form 8936 to determine your credit amount, attaching the form to your return, and entering calculated credit amount on Schedule 3 of Form 1040.
See Form 8936 for yourself here!
In the past, taxpayers had to wait to claim the credit on their annual tax return in order to collect the financial incentive. As of 2024, however, those buying electric vehicles can apply the credit at the point of sale as a “discount” on the purchase price. Instead of claiming the credit on your income tax return yourself, the Internal Revenue Service (IRS) will pay the credit directly to the dealer.
NOTE: You must complete Form 8936 even if you claimed the credit as a reduction of your purchase price.
Our Thoughts
If you are thinking of purchasing a new or used electric vehicle, it is worth considering the credit opportunity associated. If you meet the income criteria and find a qualifying EV you could save thousands!
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