Serena ChenThe 2024 electric vehicle tax credit is a nonrefundable income tax credit available for taxpayers who purchase qualifying electric vehicles or plug in hybrid vehicles. For 2024, the rules around the EV tax credit have been expanded and modified to make it more accessible for consumers.
The credit can be worth up to $7,500 for new EVs and up to $4,000 for used EVs. Taxpayers now have the flexibility to choose between claiming the credit on their tax returns or transferring the credit to an eligible dealership to lower the purchase price of the vehicle. However, fewer vehicles will qualify going forward due to new restrictions around battery component sourcing and price caps.
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Here is what you need to know about eligibility requirements, how the credit is calculated, and instructions for claiming or transferring the 2024 EV tax credit.
In a Nutshell
- Worth up to $7,500 for new EVs, $4,000 for used EVs
- Vehicle MSRP, assembly, battery, and mineral sourcing requirements
- Can claim on taxes or transfer to dealer for purchase discount
- Follow IRS rules to calculate credit and get documentation
- Ensures affordability and encourages consumers to buy EVs
Which Electric Vehicles Qualify for the 2024 Electric Vehicle Tax Credit?
For a new electric vehicle to qualify for either the full or partial federal tax credit in 2024, it must meet requirements around price, income limits, final assembly location, and battery components. Used electric vehicles have different qualifications to meet.
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New Electric Vehicle Qualifications
Price Caps
- Vans, SUVs, and trucks: MSRP of $80,000 or less
- Other vehicles (sedans, etc.): MSRP of $55,000 or less
Income Limits
- Single/Married Filing Separately: $150,000 modified adjusted gross income
- Head of Household: $225,000 modified adjusted gross income
- Married Filing Jointly: $300,000 modified adjusted gross income
Final Assembly
- Vehicle must have undergone final assembly in North America
Battery Components
- Certain percentage of battery components must be manufactured or assembled in North America
Used Electric Vehicle Qualifications
Price Cap
- Purchase price must be $25,000 or less
Battery Size
- Minimum 7 kWh battery capacity
Age
- Model year must be at least 2 years old
Weight
- Must weigh less than 14,000 pounds
Credit Frequency
- Credit can only be claimed once every 3 years
Ownership
- Only the first owner after the dealer qualifies
How Is the 2024 Electric Vehicle Tax Credit Calculated?
The maximum EV tax credit available is $7,500. It is calculated based on the vehicle meeting battery component and critical mineral sourcing requirements:
- Battery requirement – At least 50% of battery components must be manufactured or assembled in North America. This percentage will increase over time.
- Critical mineral requirement – At least 40% of critical minerals (like lithium, cobalt, etc) must be sourced from the U.S. or a country with a free trade agreement with the U.S. This percentage will also increase over time.
Here is how the calculation breaks down:
- Meets both requirements: $7,500 maximum credit
- Meets battery requirement only: $3,750 partial credit
- Meets mineral requirement only: $3,750 partial credit
- Meets neither requirement: No credit
So in summary, the EV credit can range from $0 up to the full $7,500 amount based on sourcing qualifications.
The used EV tax credit is much simpler – it is worth 30% of the vehicle’s purchase price, up to a maximum credit of $4,000.
How to Claim or Transfer the 2024 Electric Vehicle Tax Credit
There are two options for utilizing the 2024 EV tax credit:
1. Claim the credit on your tax return
- File Form 8936 with your federal tax return
- Credit will reduce your income tax liability
- Excess credit cannot be refunded or carried forward
2. Transfer the credit to the dealer
- Dealer provides a discount upfront on the purchase price
- Still need to report the transfer when filing taxes
- Provide dealer with tax ID number and sign an official purchase attestation
If transferring the credit, be sure the dealership discount matches the amount you are eligible for based on the vehicle qualifications. You’ll need to provide your tax ID and confirm eligibility requirements with the dealer.
And remember, if your income ends up exceeding the eligibility limits after you’ve transferred the credit, you’ll need to repay the credit amount back to the IRS.
Tips for Claiming the 2024 Electric Vehicle Tax Credit
Follow these tips when purchasing an electric vehicle you plan to claim a tax credit on:
- Confirm the vehicle qualifies based on the latest IRS guidance
- Review the manufacturer’s suggested retail price (MSRP)
- Verify your income is within the eligibility limits
- Check that final assembly meets requirements
- Obtain the required purchase documentation from the dealer
- Claim the credit on your tax return the same year the vehicle was delivered
- Calculate the credit accurately based on battery component qualifications
The Bottom Line
The electric vehicle tax credit makes going green more affordable by lowering the tax liability for EV purchasers. With the new direct dealer options and used EV credits, the incentive is now accessible to more taxpayers.
Alex GoodmanJust be sure to confirm qualification requirements are met and obtain the necessary purchase documentation to ensure you claim the 2024 EV tax credit correctly. Consulting a tax professional can also help navigate the nuances of the credit and optimize tax savings.
Wrap Up
The federal electric vehicle tax credit enables taxpayers to reduce their tax bill by up to $7,500 when purchasing a qualified electric car, SUV, or truck. Final assembly, price caps, battery component percentages, and income limits determine if a specific EV is eligible and the maximum credit amount.
Consumers can now get the credit at the point of sale or claim it on their tax return when the vehicle is delivered. Following IRS guidelines and obtaining the right documentation from dealers will ensure buyers maximize their 2024 EV tax savings.
FAQs
The 2024 electric vehicle tax credit applies to 4 wheeled vehicles like sedans, hatchbacks, SUVs, vans, and trucks that operate primarily on battery power and can be recharged externally. This includes battery electric (BEVs), plug in hybrid (PHEVs), and fuel cell electric vehicles (FCEVs).
Yes, both new and used EVs can qualify but have different requirements. New EVs must meet criteria for price, assembly, battery components, and critical minerals. Used EVs have lower price caps and battery capacity minimums to qualify.
You’ll need to provide the dealer your tax ID number and sign a purchase attestation confirming you meet eligibility rules. The dealer will then apply the credit amount as a discount on the vehicle price. You still report the credit on your tax return.
You’ll need the vehicle’s VIN, proof of sale date, the manufacturerβs certification of compliance, and confirmation the vehicle meets component percentage requirements per IRS rules.
Typically the leasing company owns the vehicle so they would claim the credit. But the savings may be passed on via lower lease payments. Check with the leasing company for details.
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