Your guide to the EV tax credit in 2024
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Looking to make the move toward clean cars? Or maybe you already have and you want to know if there are any tax benefits you can reap. The EV tax credit is a federal incentive that may tip the scales in your favor. Let's get into the nitty-gritty.
What's the EV tax credit?
The EV tax credit, or the clean vehicle tax credit as it's also known, is a federal initiative designed to encourage the switch from traditional gas-guzzling cars to more energy efficient vehicles such as plug-in EVs or fule-cell electric vehicles (FCV). Depending on the battery components and capacity of the vehicle you choose, you could receive a credit ranging from $2,500 to $7,500.
So how does this translate to your tax bill? The key word is “credit.” If you qualify for one of these nonrefundable tax credits, it doesn’t mean you’ll get a larger tax refund or money back. But it does reduce the amount of your tax liability by that credit amount. However, there’s a new option for 2024.
The 2024 scoop
In the tax year 2024, the rebate is substantial, but the list of qualifying vehicles is somewhat smaller. Despite this, there are still plenty of options available, and the remaining credits can make a significant dent in the purchase price of a new EV or FCV.
Also new for 2024…
Be a financially smart family!
New 2024 EV tax credit transfer election
If you buy a new or used clean vehicle after Dec. 31, 2023, you can opt to transfer your ev tax credit amount to an eligible seller (such as a dealer) in order to get a more immediate financial benefit. Doing this can allow the seller to reduce the overall price tag of the vehicle by that credit amount, so you get a lower purchase price.
If you like this idea, you can transfer your new or previously owned clean vehicle tax credit. If you prefer the tax savings, you can claim the ev tax credit on your return instead.
Pro tips:
Check before you buy. Not all sellers are eligible. If you want to explore the ev credit transfer, make sure you’re buying from an eligible entity – usually a dealership that sells new clean vehicles or previously owned clean vehicles.
Claim the credit at purchase, not after. As of Jan. 1, 2024, you have to initiate and get approval for ev tax credits or clean vehicle tax credits at the time of sale. The IRS advises all buyers to get an official IRS confirmation that the dealer submitted a valid “time of sale” report.
Who qualifies for the credit?
Several factors go into determining your eligibility. Individual taxpayers and businesses may be eligible if they:
Buy the vehicle for their own use (not for resale)
Use the vehicle mainly in the United States
For new EVs and clean vehicle purchases, buyers must fall within these modified adjusted income (AGI) limits:
$300,000 for married couples filing jointly
$225,000 for heads of household
$150,000 all other filers
For used EVs, buyers must fall within these AGI limits:
$75,000 single and married filing separately
$112,500 for heads of household
$150,000 married filing jointly
Which vehicles qualify?
New (2023 or later) all-electric, plug-in hybrid, and fuel cell electric vehicles may qualify for a federal income ev tax credit. However, not all EVs are created equal – at least, not when it comes to the EV tax credit. It comes down to when you bought the vehicle:
Vehicles sold before Jan. 1, 2023
For some vehicles, there is a “phase-out” period that reduced or limited the EV tax credit benefit. For vehicles sold before Jan. 1, 2023, if a manufacturer had sold 200,000 qualifying vehicles in the U.S., the credits for their vehicles start to phase out. This means that some popular models might not qualify for the full credit, or any credit at all.
Vehicles sold after Jan. 1, 2023
Sales volume limitations are lifted for vehicles sold after Jan. 1, 2023. So if you bought a qualifying vehicle after this date, you may be eligible for up to the full credit. To find out if the model you're interested in is eligible for the credit, check out the list of qualifying vehicles on fueleconomy.gov.
Final assembly rules
To qualify for the EV tax credit, your vehicle must also have completed the final assembly process within North America. You can confirm this (and overall ev tax credit eligibility) with an eligible dealership, or check the vehicle’s identification number (VIN) with the National Highway Traffic Safety Administration.
Ready to make the switch?
Switching to an electric vehicle or other higher-efficiency vehicle is a big decision. But the 2024 EV tax credit could help. If you and your vehicle qualify, taking advantage of the clean vehicle tax credit can save you money and help the environment.
Remember: Tax laws change. Always double-check with the IRS and a qualified, reputable tax professional for the most current information.
EV tax credit FAQs
Q: What is the 2024 EV tax credit?
A: The 2024 EV tax credit is a federal tax credit offered to individuals who purchase a qualifying new or used clean vehicle.
Q: Who is eligible for the 2024 EV tax credit?
A: Individuals who purchase a new or used clean vehicle and meet all the IRS income and vehicle criteria may be eligible for the credit.
Q: How does the 2024 EV tax credit work?
A: The amount of the credit depends on your vehicle and taxpayer details.
Q: Can the 2024 EV tax credit be applied toward leasing an electric vehicle?
A: The 2024 EV tax credit may be applied by using the ev tax credit transfer program through an eligible entity. However, the tax credit will typically go to the leasing company rather than the individual leasing the vehicle, so make sure to read the fine print and confirm your eligibility.
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