Federal Tax Credit

Important: The Inflation Reduction Act of 2022 put in place a federal tax credit for new electric vehicles (up to $7,500) and used electric vehicles (up to $4,000). However, on July 4, 2025, President Trump signed into law the “One Big Beautiful Bill Act,” which ends the federal tax credit after September 30, 2025. As a result, the following text is only true through end of September this year. This page details the eligibility requirements for you and your chosen electric vehicle (EV) as well as how to get the credit. 

There are income caps to qualify for the Clean Vehicle Credit. Below are the modified adjusted gross income (AGI) limits: 

• $300,000 for joint filers.
• $225,000 for heads of households.
• $150,000 for individual filers. 

You can use your modified AGI from either the year you receive the vehicle or the previous year, whichever is lower. If your modified AGI is below the threshold in either of those years, you qualify for the credit. 

There is no limitation on the number of vehicles a person can purchase and receive credits for in a particular year, provided the person and vehicles meet all the other eligibility requirements (although consumers are limited to two credit transfers to a dealer per year, per social security number).

To qualify for the federal tax credit, a vehicle must meet three requirements:

• Its Manufacturers Suggested Retail Price (MSRP) must be under a certain limit ($55,000 for sedans and hatchbacks and $80,000 for SUVs, pick-up trucks, and vans.)
  • MSRP is the retail price of the vehicle suggested by the manufacturer, including manufacturer installed options, accessories and trims, but excluding destination fees.
  • To be clear, if you are looking for a sedan and it has an MSRP of $52,000, but the dealer sells you the car for $57,000, you still qualify for the federal tax credit because it's based on MSRP, not final purchase price. 
• It must meet complicated battery requirements.  

If you’d like to get into the nitty-gritty of these rules, you can do so on the IRS webpage for the tax credit. But if you just want to know which vehicles qualify for what, you can use our EV Finder.  

Leasing is an alternative if the vehicle of your choice does not qualify for the Clean Vehicle Credit. When you lease a vehicle, the leasing agent can claim a commercial clean vehicle tax credit (which doesn’t have the same stringent eligibility requirements). Many dealers pass on the savings to consumers in the form of lower monthly payments. (This commercial vehicle tax credit is also ending after September 30, 2025.)

Used EVs may qualify for the Used Clean Vehicle Credit. Buyers can expect a tax credit of $4,000 or 30% of sales price, whichever is lower.  

There are two requirements for consumers wishing to access the used tax credit. 

• The income threshold to qualify is $150,000 for joint filers, $112,500 for heads of household, and $75,000 for single filers.
• Buyers can only use this credit once every 3 years, but two individuals filing a Married Filing Joint tax return could both claim the credit in a particular tax year.

Eligible used vehicles do not retain the same complicated mineral and assembly requirements of the federal new vehicle tax credit. 

• There are no battery sourcing requirements for used vehicles.
• The car must be bought from a dealership and be at least 2 years old.
• The cost of the car cannot exceed $25,000.
• The used car tax credit can only be on the first resale of a vehicle.

Consumers of new and electric vehicles may receive the tax credit as part of their tax return or at point of sale. Either way, consumers must purchase or lease their new or used vehicle from an IRS registered dealership. Unfortunately, there is no list of IRS dealerships that we know of, so you will have to verify with the dealership you have chosen to purchase or lease from. 

If you opt to receive the tax credit as part of your tax return, you will have to fill out IRS form  8936 when filing your taxes. This option also means that the tax credit is limited by your personal tax liability. 

If you opt to receive the tax credit at point of sale, you can choose to receive cash to go towards the downpayment or apply the credit towards the cost of the EV. This means the tax credit is no longer dependent upon your personal tax liability (but personal income limits still apply).

When purchasing/leasing an EV, familiarize yourself with these steps before you go to the dealership: 

1. Confirm that your expected income for this year is below the required limit.
2. Make sure the dealership or store you’re working with has registered with the IRS Energy Credits online portal; confirm this with a salesperson or general manager.
3. Ask the salesperson to confirm via Energy Credit Online portal if the vehicle you’re considering qualifies for the federal tax credit.
4. Sign your purchase or lease paperwork before September 30, 2025.
5. After purchase, make sure to receive a copy of a) the time-of-sale report submitted by the dealer and b) a copy of the confirmation from the IRS of successful submission.
6. During tax season, file Form 8936. Do this even if you do not normally file taxes or if you receive the incentive at point-of-sale.