Until recently, electric vehicles (EVs) have been viewed as unaffordable by many. But because of the U.S. Treasury Department’s new guidance on how a $7,500 EV tax credit may be used as a point-of-sale rebate beginning January 2024, EVs are now accessible to more people, with state or local tax incentives also potentially applying.
On October 6, 2023, the U.S. Treasury Department proposed a rule that gives buyers of new EVs (all-electric, plug-in hybrid and fuel cell electric vehicles) substantial tax credits (i.e., new clean vehicle credits) of up $7,500 in or after 2023, and gives buyers of used EVs a $4,000 credit.
At the time of sale, a seller must give a buyer information about the vehicle's qualifications, according to the IRS. Sellers must also register online and report the same information to the IRS. If they don't, the vehicle won't be eligible for the credit. Which cars qualify for EV tax credits? Compiled by NerdWallet, the following is a list of car makes and models that qualify for EV tax credits for 2024:
(Full eligibility rules for the previously owned clean vehicle credit is available at the U.S. Department of Energy.)
Tax credits for EV leases are handled a little differently than credits for EV purchases. With leases, the originator of the lease (usually the automaker’s finance division) receives the full tax credit of $7,500 for the leased EV. But thanks to a legislative loophole, the automaker has the right to pass some of these savings along to you in the form of a more affordable lease. For people whose income may disqualify them from receiving the tax credit on the purchase of a new EV, leasing may be an appealing option. Of course, each automaker gets to decide whether to pass the savings along to the lease holder.
Keep in mind, lease deals may become more competitive as 2024 ramps up and more EV inventory becomes available. Additionally, lease restrictions are always changing so be sure to frequently check sites like InsideEVs to see what lease discounts are available on varying makes and models.
Below are some of the most frequently asked questions regarding tax credits and incentives for plug-in electric and fuel cell vehicles that we may not have already addressed above. This list is not comprehensive but concludes with resources where you can find more information about EV tax incentives and other items of interest.
Q: Where can I find EV laws and tax incentives specific to my state?A: The U.S. Department of Energy's Alternative Fuels Data Center page provides a full list of incentives, laws and regulations specific to EVs in each state.
Q: Are credits and deductions the same thing?A: No, an EV tax credit reduces the total amount of income tax credit you owe. A deduction reduces the amount of income for which you are taxed.
Q: Can the new clean vehicle credit split between multiple owners of an EV?A: No. Only one taxpayer can claim the new clean vehicle credit. Further, multiple buyers of a new clean vehicle should inform the seller which buyer will claim the credit so the seller can identify that taxpayer on the seller’s report.
Q: Can my income prevent me from taking the new clean vehicle credit?A: Yes. You may not claim the credit if your modified adjusted gross income (AGI) exceeds certain thresholds. Full details about the income threshold levels are available from the U.S. Department of Energy.
Q: When do I claim my credit if I take delivery of my new clean vehicle one year after I order it?A: For vehicles purchased on or after August 16, 2022, the new clean vehicle credit is claimed in the tax year that the vehicle is placed in service (i.e., the date the taxpayer takes delivery of the vehicle). For vehicles that are placed in service after they are ordered, a vehicle's eligibility for the new clean vehicle credit may change depending on when the taxpayer takes delivery of the vehicle. However, according to the U.S. Department of Energy, if you entered into a written binding contract to buy a new clean vehicle after December 31, 2021, and before August 16, 2022, but took possession on or after August 16, 2022, you must claim the credit on a tax return for tax year 2022.
Q: Where can I view a full list of the most frequently asked questions pertaining to EV credit eligibility, income and price limitations, credit requirements and credit eligibility for previously owned EVs?A: Please visit U.S. Department of Energy for a comprehensive list of vehicle tax incentive questions and answers.