Finance & Career

Clean Vehicle Tax Credits

3 min read
A black electric car being charged.

If you recently purchased or are considering an electric vehicle (EV) or fuel cell vehicle (FCV), you may qualify for tax credits. To be eligible for the credit, sellers must register online and report information to the Internal Revenue Service (IRS) at https://www.irs.gov/credits-deductions/register-your-dealership-to-enable-credits-for-clean-vehicle-buyers. The amount and eligibility for the tax credit depends on whether the car is new or used, the year you purchased the car, and the date the car first hit the road.

New Vehicle for Personal Use (Bought 2023 or After)

All-electric, plug-in-hybrid, and fuel-cell electric vehicles purchased new in 2023 or after may be eligible for a federal income tax credit of up to $7,500. To determine if you qualify for the tax credits, you must satisfy the following rules:

  • Bought for your own use, not for resale
  • Use it primarily in the United States

To qualify, your Modified Adjusted Gross Income (MAGI) cannot exceed values listed below.

  • $300,000 for married filing jointly
  • $225,000 for heads of households
  • $150,000 for other filers

The date that the vehicle is placed in service is important. The in-service date is the day the car was first ready and available for use by the manufacturer.

If a car was placed in-service January 1 to April 17, 2023, the tax credit base amount is $2,500. Additional credits can include the following:

  • $417 for a vehicle with at least 7 kilowatt hours (kWh) of battery capacity
  • $417 for each kWh of battery capacity beyond 5 kilowatt hours
  • Up to $7,500 total

If a vehicle is placed in-service April 18, 2023 and after, vehicles will have to meet all the same criteria listed above, plus meet new critical mineral and battery component requirements for a credit up to $3,750 if the vehicle meets the critical minerals requirement only.

  • $3,750 if the vehicle meets the battery components requirement
  • $7,500 if the vehicle meets both requirements

The qualified vehicles must meet the following criteria.

  • Have a battery capacity of at least 7 kWh
  • Have a gross vehicle weight rating of less than 14,000 pounds
  • Be made by a qualified manufacturer
  • Undergo final assembly in North America
  • Meet critical mineral and battery component requirements (as of April 18, 2023)

A vehicle that does not meet either requirement will not be eligible for credit.

New Vehicle (Bought 2022 or Before)

If you bought a new, qualified plug-in EV in 2022 or before, you may be eligible for a clean vehicle tax credit up to $7,500 under Internal Revenue Code Section 30D. The credit equals $2,917 for a vehicle with a battery capacity of at least 5 kWh. Additional credits in the amount of  $417 for each kWh of capacity over 5 kWh are also available.

The maximum credit is $7,500. It is nonrefundable, so you can’t get back more on the credit than you owe in taxes. You can’t apply any excess credit to future tax years.

To qualify for the credit, you must buy the vehicle for your own use in the US and not for resale.

Qualified vehicles must meet the following criteria.

  • Have an external charging source
  • Have a gross vehicle weight rating of less than 14,000 pounds
  • Be made by a manufacturer that hasn’t sold more than 200,000 EVs in the US

Used Vehicles 

Find information on federal tax credits for electric vehicles here at https://www.fueleconomy.gov/feg/taxused.shtml. When buying a used care, to qualify for the tax credits you must meet the following criteria:

  • Be an individual who bought the vehicle for use and not for resale
  • Not be the original owner
  • Not be claimed as a dependent on another person’s tax return
  • Not have claimed another used clean vehicle credit in the three years before the purchase date

In addition, your MAGI may not exceed the following:

  • $150,000 for married filing jointly or a surviving spouse
  • $112,500 for heads of households
  • $75,000 for all other filers

To qualify for the credits, your vehicle must meet all of the following requirements:

  • Have a sale price of $25,000 or less. Sale price includes all dealer-imposed costs or fees not required by law. It doesn’t include costs or fees required by law, such as taxes, title, and registration fees.
  • Have a model year at least two years earlier than the calendar year when you buy it. For example, a vehicle purchased in 2023 would need a model year of 2021 or older.
  • Not have already been transferred after August 16, 2022, to a qualified buyer.
  • Have a gross vehicle weight rating of less than 14,000 pounds.
  • Be an eligible FCV or plug-in EV with a battery capacity of least 7 kWh.
  • Be for use primarily in the US.

There are many ways for you to maximize your tax benefits for your home and your car, yet several rules apply. Contact a tax preparation professional to help ease the stress of understanding tax rules for vehicle and home improvements.

More Resources

More information can be found by visiting the websites listed below.