EV tax credit: 2024-25 credits and rules for new & used electric vehicles

Electric vehicles are gaining in popularity—and for a good reason. Not only are they environmentally friendly, but they also have tax benefits. In fact, there is an electric vehicle tax credit available if you purchase a qualifying electric vehicle (EV) in 2024. 

There’s a good reason to pay attention to changes this year. In fact, the Inflation Reduction Act passed in 2022 changed the existing electric vehicle tax credit and even added a new EV tax credit for used vehicles and a new federal EV tax credit for commercial vehicles.

Claiming electric vehicle tax credits for 2024

In 2024 (for taxes filed in 2025), taxpayers may qualify for three different types of Clean Vehicle Credits (sometimes called EV tax credits although the IRS uses the term Clean Vehicle):

• New Clean Vehicle Credit
• Previously Owned Clean Vehicle Credit
• Qualified Commercial Clean Vehicle Credit

You claim these federal EV tax credits on IRS Form 8936.

Sound like something you may qualify for? Or are you considering purchasing an electric car (or other vehicles) and want to learn more? Read on as we share the details about the cars that qualify for an EV tax credit.

Who qualifies for the New Clean Vehicle Credit?

The New Clean Vehicle Credit applies to purchasers of an electric drive motor vehicle meeting certain specifications. It’s worth determining if you qualify, as this EV tax credit is worth up to $7,500. The New Clean Vehicle Credit can be claimed for vehicles placed in service after December 31, 2022, but doesn’t apply to cars bought after December 31, 2032. The EV tax credit is non-refundable, so you won’t get a refund for the unused portion of it. In addition, you can’t carry the EV tax credit over to your next year’s tax return.

Qualifying for an IRS electric vehicle tax credit

Knowing the value of this credit, you might ask, “How does the EV tax credit work?”  To qualify for the New Clean Vehicle Credit, you must purchase and place in service a qualified motor vehicle, and the following must be true:

• You own the vehicle, and you’re the first-time owner.
• You started using it in the current tax year.
• You bought it for your own use, and not for resale.
• You use it primarily in the U.S.
• Your modified adjusted gross income (MAGI) is equal to or less than $300,000 (for Married Filing Jointly and Qualifying Surviving Spouse filers), $225,000 (for Head of Household filers), or $150,000 for all other filers.

Cars that qualify for the EV tax credit

• The vehicle meets one or both of the following (up to a $3,750 EV tax credit for meeting each separate part):
  • Critical mineral specifications, and 
  • Battery components specifications.
• The vehicle must be an electric vehicle, plug-in hybrid vehicle, or fuel cell vehicle.
• Final assembly must have occurred in North America. You’ll need the Vehicle Identification Number (VIN) to confirm this on the Department of Energy’s VIN lookup tool.
• Have a manufacturer-suggested retail price (MSRP) of no more than $80,000 for vans, SUVs, and pick-ups, and $55,000 for other vehicles. A list of eligible EV vehicle makes and models and the applicable MSRP limit is available on FuelEconomy.gov. Not every version of the model will necessarily qualify, so it’s also important to ask the dealer about eligibility for the specific vehicle you are considering purchasing.
• The dealer must provide a report at the time of sale, or seller report, which details required information such as the dealer name, address, VIN, make, model, placed in service date and maximum credit amount.

How to claim the EV tax credits

The Electric Vehicle Tax Credit can be transferred to the car dealer at the time of purchase starting in 2024. Essentially, when a buyer transfers the credit, the dealer advances the credit amount to the buyer and the dealer follows up with Internal Revenue Service (IRS) to claim the credit. The buyer will still need to file Form 8936 with the IRS detailing the vehicle purchase and credit transfer. The buyer could also choose to forgo transferring the EV credit to the dealer and claim the credit on their tax return.

Both individuals and small businesses (including self-employed individuals and independent contractors) can benefit from the New Clean Vehicle Tax Credit.

How to file Form 8936

To claim one of the clean vehicle tax credit, you’ll need to complete Form 8936 and submit it with your individual or business return. To claim the new clean vehicle credit, individuals and businesses will complete Parts I, II, and III. You will need to provide information on the vehicle including the battery capacity and date placed in service.

To claim the previously owned vehicle credit, you’ll need to complete Parts I and IV of Form 8936 and submit it along with your return. You’ll need to include information about the vehicle and the sale information on Form 8936.

Used EV tax credit for 2024

Not just new electric vehicles qualify for a tax credit! In fact, there’s a new credit available for previously owned clean vehicles purchased after December 31, 2022, through December 31, 2032. The maximum used EV tax credit is $4,000.

Qualifying for an IRS used EV tax credit

Here are the details of the Credit for Previously Owned Clean Vehicles:

• The credit is limited to the lesser of $4,000 or 30% of the vehicle’s purchase price.
• You can claim the credit once every three years.
• Your modified AGI must be less than $150,000 (for Married Filing Jointly and Qualifying Surviving Spouse filers), $112,500 (for Head of Household filers), or $75,000 for all other filers.

Cars that qualify for a used EV tax credit

• The vehicle sales price must be $25,000 or less—and the vehicle must be sold by a dealer on the first transfer of the qualifying vehicle.
• The manufacturer must certify to the IRS the vehicle qualifies for the Previously Owned Clean Vehicles Credit. Information about qualifying vehicles is available at https://www.fueleconomy.gov/feg/taxused.shtml.
• A Vehicle Identification Number (VIN) is required to claim the credit.
• The model year of the used EV must be at least two years earlier than the year the vehicle was sold.
• The vehicle must have a gross vehicle weight rating of less than 14,000 pounds
• It must be an eligible fuel cell vehicle or plug-in electric vehicle with a battery capacity of at least 7 kilowatt hours
• The taxpayer must have a seller report from the dealer.

How to claim the used EV tax credit

Just like the New Clean Vehicle Credit, this credit can be transferred to the car dealer at the time of purchase starting in 2024. The buyer will still need to file Form 8936 with the IRS detailing the vehicle purchase and credit transfer. The buyer may also choose to forgo transferring the credit to the dealer and claim this federal EV tax credit on IRS Form 8936.

Credit for Qualified Commercial Clean Vehicles for 2024

Businesses and tax-exempt organizations who purchase and place in service a commercial clean vehicle may qualify for a Clean Vehicle Tax Credit of up to $40,000. The vehicle must be for business use to qualify.

The maximum Commercial Clean Vehicle Credit is the lower of 15% of the vehicle basis (or 30% for a vehicle not powered by a gasoline or diesel internal combustion engine) or the incremental cost of the vehicle. Under a safe harbor for 2024, the IRS will allow taxpayers to claim that $7,500 as the incremental cost of certain street vehicles with a GVWR of less than 14,000 pounds when figuring the Commercial Clean Vehicle Credit.

Just like the New Clean Vehicle Credit and the Previously Owned Clean Vehicle Credit, a vehicle must be made by a qualified manufacturer.

Here are the details of the Commercial Clean Vehicle Credit:

• The vehicle must be for use in your business, and not for resale.
• It must be used primarily in the United States.
• You have not been allowed a different vehicle credit for the vehicle.
• The vehicle is manufactured primarily for use on public roads or qualifies as mobile machinery.
• The vehicle or machinery must be either
• A plug-in electric vehicle that draws significant propulsion from an electric motor with a battery capacity of at least 7 kilowatt hours if the gross vehicle rating (GVWR) is under 14,000 pounds or 15 kilowatt hours if the GWR is 14,000 pounds or more; or
• A fuel cell motor vehicle that satisfies additional requirements.

The Commercial Clean Vehicle Credit is also claimed on Form 8936.

Get help claiming the EV tax credits for 2024-2025

Claiming an EV tax credit can be complex, which is why we’re here to help! Whether you make an appointment with one of our knowledgeable tax pros or choose one of our online tax filing products, you can count on H&R Block to navigate tax deductions and federal electric vehicle tax credits.