The 2024 electric vehicle tax credit has been updated and broadened. Below are the eligibility requirements, restrictions, and how to qualify.
If you're considering an electric car this year, you could save money—either upfront or in the future.
Purchasers of new electric vehicles may be eligible for a tax credit of up to $7,500, while buyers of used electric cars could qualify for up to $4,000. Starting in 2024, consumers also have the option to transfer the credit to an eligible dealer, allowing for an immediate discount at the point of sale.
However, consumers may face some challenges as the changes to the electric vehicle tax credit take effect. In 2024, fewer vehicles will qualify for the benefit due to stricter battery manufacturing restrictions.
What is the electric vehicle tax credit?
The electric vehicle tax credit, commonly referred to as the EV credit, is a nonrefundable tax credit available to taxpayers who purchase qualifying electric or plug-in hybrid vehicles. Nonrefundable tax credits reduce your tax liability by the amount of the credit but do not provide refunds for any excess credit.
In 2024, taxpayers have an additional option: they can transfer the tax credit to an eligible dealership instead of claiming it on their tax returns the following year. This allows the dealer to reduce the vehicle's cost by the corresponding credit amount, offering an immediate discount at the point of sale.
To qualify for either option, your income must meet specific thresholds, and the vehicle you intend to buy must comply with various IRS requirements, including price limits and manufacturing criteria.
Which cars qualify for a federal EV tax credit?
As of September 2024, the following fully electric and plug-in hybrid vehicles may qualify for either a full or partial tax credit if delivered on or after January 1, 2024.
The IRS recommends using the tool on the FuelEconomy.gov website to access the most current information on eligible models. You can filter by purchase scenario, model year, and vehicle type to see which cars qualify based on their delivery date. Additionally, the IRS advises checking with the dealer, as some versions of the listed vehicles may not be eligible.
How to qualify for the 2024 EV tax credit
Price cap
Vans, SUVs and pickup trucks must have an MSRP, or manufacturer's suggested retail price, of $80,000 or less to qualify. Other vehicles, such as sedans and passenger cars, are capped at $55,000. For used vehicles, the price cap drops to $25,000.
For new vehicles, the MSRP, as defined by the IRS, is the base retail price provided by the manufacturer, plus the retail price of each accessory or optional piece of equipment that is physically present on the car at the time of delivery to the dealer. For purposes of claiming the credit, MSRP does not include taxes and other fees added on by the dealer.
EV tax credit income limits
Along with price caps on cars, the EV tax credit also sets limits on the modified adjusted gross income that taxpayers can make in order to qualify.
New EVs
Single and married filing separately: $150,000.
Head of household: $225,000.
Married filing jointly: $300,000.
Used EVs
Single and married filing separately: $75,000.
Head of household: $112,500.
Married filing jointly: $150,000.
A nice bonus here is that, per the IRS, you can use your MAGI from either the year the car is delivered or the year before delivery.This means if your income exceeded the threshold one year, but was below the cap during the other year, you may still be able to snag a credit.
If your income precludes you from qualifying, there are also several tax strategies you can consider to lower your income throughout the year, such as maxing out your 401(k) or contributing to an HSA or FSA.
Final assembly requirements
To be eligible for the credit, vehicles must have had final assembly in North America. You can reference the National Highway Traffic Safety Administration’s VIN, or vehicle identification number, database to check out a car’s final assembly details.
Used EV tax credit qualifications
Taxpayers can receive a credit of up to $4,000 for qualifying used electric vehicle (EV) purchases, limited to 30% of the vehicle’s purchase price. Here are some additional requirements:
- The used car must be a plug-in electric or fuel cell vehicle with a minimum battery capacity of 7 kilowatt hours.
- The credit applies only to the first transfer of the vehicle.
- The purchase price of the car must be $25,000 or less.
- The car model must be at least two years old.
- The vehicle must weigh under 14,000 pounds.
- The credit can be claimed only once every three years.
conclusion
The clean vehicle credit expansion is exciting news for taxpayers looking to go green, but it still remains fairly complicated and nuanced — especially given the murk surrounding the new sourcing requirements that are set to adjust each year. If you’re confused about your eligibility, or want guidance for your personal situation, consider consulting a qualified tax professional, such as a CPA or a tax preparer, before you sign on the dotted line.
