- All
- New EV Tax Credit
- Used EV Tax Credit
- EV Tax Credit Transferability
- Leasing EV Tax Credit
- Commercial EV Tax Credit
Commercial EV Tax Credit
What is incremental cost, and will that affect the amount of the tax credit?
The incremental cost is the cost difference between the new clean vehicle and a comparable new gas-powered (ICE) vehicle. The Department of Energy conducted a study that found that all EVs would have an incremental cost of at least $7,500 for 2023. The only exception is compact Plug-In Hybrid Electric Vehicles (PHEVs), which would have the tax credit capped at $7,000. The IRS issued a safe harbor notice for 2023 that all EVs have an incremental cost of at least $7,500 except compact PHEVs, which have an incremental cost of $7,000.
For vehicles weighing over 14,000 pounds, the tax credit is $40,000. This tax credit applies to medium- and heavy-duty vehicles like school buses and garbage trucks. Once the cost difference between the electric version of these vehicles and the gas or diesel version of these vehicles is less than $40,000, the incremental cost will be the value of the tax credit.
We will continue to update these numbers each year. As the purchase price of an EV gets closer to the cost of a comparable gas-powered vehicle, this number will eventually equal zero, meaning leases will no longer be eligible for this tax credit.
It is important to note that over the vehicle’s life, EVs typically cost less because they require less maintenance, are more efficient, and cost less to power. In addition, electricity prices are very stable over the long term, meaning that they are budget-friendly and aren’t subject to the same price volatility as gas. Read more about total cost of ownership.
Can non-taxable entities like nonprofits, cities, or governments with fleets get the commercial tax credit?
Yes, the Commercial Clean Vehicle Tax Credit, also known as Internal Revenue Code 45W, is refundable (or direct pay) for tax-exempt entities like nonprofits or governments (i.e., cities or counties). This means that tax-exempt entities can claim and receive the tax credit even though they don’t pay any taxes. The IRS treats the tax credit as if it were an overpayment of taxes and refunds the money to the tax-exempt entity even though no taxes were paid.
Leasing EV Tax Credit
What is incremental cost, and will that affect the amount of the tax credit?
The incremental cost is the cost difference between the new clean vehicle and a comparable new gas-powered (ICE) vehicle. The Department of Energy conducted a study that found that all EVs would have an incremental cost of at least $7,500 for 2024. The only exception is compact plug-in hybrid electric vehicles (PHEVs), which would have the tax credit capped at $7,000. The IRS issued a safe harbor notice for 2024 that all EVs have an incremental cost of at least $7,500 except compact PHEVs, which have an incremental cost of $7,000.
We will continue to update these numbers each year. As the purchase price of an EV gets closer to the cost of a comparable gas-powered vehicle, this number will eventually equal zero, meaning leases will no longer be eligible for this tax credit.
It is important to note that over the life of the vehicle, EVs typically cost less because they require less maintenance, are more efficient, and cost less to power. In addition, electricity prices are very stable over the long term meaning that they are very budget-friendly and aren’t subject to the same price volatility as gas. Read more about total cost of ownership.
If I am leasing an EV and at the end of my lease I purchase the vehicle from the dealer, will the used vehicle purchase tax credit apply?
IRS Guidance FS-2023-29 indicates that “original use” with regard to leases is, “where a vehicle is acquired for lease to another person, the lessor is the original user.” This means that the finance company, which actually owns the vehicle, is the original user.
Since the original use would be the lessor (owner of the vehicle), we understand this to mean that the finance company would be the original use, and the lessee (person leasing the vehicle) could buy the vehicle as a used vehicle using the tax credit, as long as the vehicle and buyer meet other eligibility requirements.
Used EV Tax Credit
Does the amount of the used EV tax credit depend on whether a vehicle is all-electric or plug-in hybrid electric?
No, both all-electric vehicles and plug-in hybrid electric vehicles are eligible for the full $4,000.
Does the vehicle purchase price for the previously owned Clean Vehicle Tax Credit depend on the type of vehicle purchased, such as a van, pickup truck, SUV or other vehicle?
No, all previously owned clean vehicles are eligible for a tax credit of up to $4,000 or 30% of the vehicle sales price, whichever is less.
If a vehicle has already received a tax credit when it was purchased as new, is it eligible for the used tax credit?
Yes. A vehicle is limited to one credit per vehicle for each type of credit, meaning that a vehicle can receive the tax credit as a new vehicle and again as a used vehicle for a different owner.
Do I have to purchase the vehicle from a dealer?
Yes, to be eligible for the tax credit, the vehicle must be purchased from a dealer registered with the IRS.
Can businesses receive the previously owned clean vehicle tax credit?
No, only individuals can receive the previously owned clean vehicle tax credit.
How much is the used EV tax credit?
The previously owned clean vehicle tax credit can be up to $4,000 or 30% of the vehicle sales price, whichever is less.
EV Tax Credit Transferability
Do I still need to meet the income limits if I transfer the tax credit to a dealer?
Yes. If you transfer the tax credit, you need to sign a document attesting that you expect that your income did not exceed the income limits either last year or this year. If your income exceeds the limits for both of those years, you will be required to repay the amount received for transferring the tax credit to the IRS in addition to your normal taxes.
Can I access the upfront tax credit from a direct-to-consumer manufacturer?
The transferable tax credit applies if you buy a vehicle from a direct-to-consumer manufacturer, such as Tesla, Rivian, or Lucid. The definition of “dealer” in the statute is an organization licensed in a state or territory to sell vehicles. The new guidance goes further to state, “To allow for flexibility, especially in the case of direct-to-consumer sales, the proposed definition of dealer includes a dealer licensed in any jurisdiction described in section 30D(g) (other than one exclusively licensed in a U.S. territory) that makes sales in jurisdictions in which it may not be licensed.”
If you meet the buyer income limits and the vehicle meets the tax credit requirements, you can purchase from a direct-sales EV manufacturer (online, if necessary) and receive the tax credit upfront.
Can I transfer the tax credit on more than one EV?
Each taxpayer can transfer two EV tax credits per year. This can be two new clean vehicle tax credits, OR it can be one new clean vehicle tax credit and one used clean vehicle tax credit. In the case of those filing joint returns, each person may transfer two tax credits per year as described in the last sentence. So, a household filing jointly can transfer up to four clean vehicle tax credits each year.
Do I need to transfer my tax credit to the dealer?
No, you do not need to transfer your tax credit to the dealer. If you want to wait for the tax credit and receive it as a tax refund when you file your taxes next year, you can do that.
If I get my tax credit at the time of sale, will I still need to pay taxes?
You still have to file your tax return and file Form 8936 with your Vehicle Identification Number (VIN). The dealer will give you the necessary paperwork at the time of sale for Form 8936. Be sure you receive a successfully submitted seller report before you leave the dealership. Download our EV Shopper Checklist to help you at the dealership.
Does the dealer need to have tax liability to participate in the credit transfer?
No. The dealer does not need to have tax liability to receive the transfer. The dealer simply acts as a pass-through for transferred tax credits. The dealer is required to pass the full amount of the tax credit on to the buyer.
Do I need to have tax liability to receive the upfront tax credit?
No. You can still get the full amount of the tax credit if you transfer your tax credit to the dealer. Historically, many tax credits haven’t been accessible to lower-wealth individuals and households because lower earnings mean lower tax liability. Because the EV tax credits are transferable, the EV buyer no longer needs to have tax liability to access the credit.
What does it mean that the new and used EV tax credits are transferable?
It means that when you purchase an eligible electric vehicle (EV) or plug-in hybrid electric vehicle (PHEV) and you meet the income requirements, you can choose to transfer your tax credit to a registered dealer and get the FULL amount of the tax credit upfront as a reduction on the price of the vehicle.
For NEW vehicles: Depending on the vehicle, you could get $3,750 or $7,500 off of the purchase price at the time of the sale. This money can also be used as a down payment on the vehicle.
For USED vehicles: Depending on the vehicle, you could get $4,000 off of the purchase price at the time of the sale. This money can also be used as a down payment on the vehicle.
New EV Tax Credit
Does the amount of the new EV tax credit depend on whether a vehicle is all-electric or plug-in hybrid electric?
No, both all-electric vehicles and plug-in hybrid electric vehicles are eligible for the tax credit based on whether their batteries meet the critical minerals requirements and the battery component requirements.
If I ordered a vehicle in 2023 and it was delivered in 2024, does the Foreign Entities of Concern rule apply?
Yes, the tax credit guidance is based on when the vehicle is placed in service, so if you take delivery of your vehicle in 2024, the guidance at the time you take delivery of your vehicle will apply. FuelEconomy.gov provides updated information on vehicle eligibility.
Are vehicles made by manufacturers that have sold over 200,000 vehicles eligible for the new clean vehicle tax credit?
Yes. As of Jan.1, 2023, the prior sales volume limits no longer apply. This means GM and Tesla vehicles are eligible for the tax credits if they meet the other eligibility requirements.
Can I get the tax credit by leasing a new clean vehicle?
If you lease a vehicle, the lessor (company that maintains the vehicle title) is the original user. This means that they will claim and receive the tax credit, but they can pass it along to the lessee (you, the customer) in your lease payments. When negotiating your lease terms, simply ask if they are willing to lower your deposit or monthly payments in an amount equal to the tax credit. The lessors receive the tax credit through the Commercial Clean Vehicle Tax Credit.
What is a qualified manufacturer?
A qualified manufacturer is a manufacturer that enters into a written agreement with the IRS. A list of qualified manufacturers is maintained by the IRS and can be found here.
How do I know whether my vehicle will be defined as a truck, van, SUV or other type of vehicle for the purposes of the MSRP cap?
The vehicle’s classification will be displayed on the window sticker of the vehicle as well as online. FuelEconomy.gov pre-screens which vehicles are eligible for the tax credit. Visit the site, select the delivery date and it will show you which vehicles are eligible for the credit and how much they are eligible for. It takes the guesswork out of determining vehicle eligibility for the tax credits.
How do I determine if the vehicle I want meets the MSRP cap?
The MSRP is the base retail price suggested by the manufacturer, plus the retail price suggested by the manufacturer for each accessory or item of optional equipment physically attached to the vehicle at the time of delivery to the dealer. It does not include destination charges, optional items added by the dealer, or taxes and fees. The MSRP caps for the new clean vehicle tax credit are as follows:
- Vans / SUVs / Pickup Trucks – $80,000
- Other – $55,000
If the vehicle arrives at the dealer and the MSRP on the sticker is below the cap for that vehicle, it should be eligible for the tax credit as long as the other Clean Vehicle Tax Credit requirements are met.
Are the income limits talking about gross income or something else?
The income limits are based on Modified Adjusted Gross Income. According to the IRS, your modified AGI is the amount from line 11 of your Form 1040 plus:
- Any amount on line 45 or line 50 of Form 2555, Foreign Earned Income.
- Any amount excluded from gross income because it was received from sources in Puerto Rico or American Samoa.
What if you expect your income to be different this year than last year?
You will qualify based on the Modified Adjusted Gross Income (MAGI) which is the lesser of the two years. For example: You are a single filer and had a MAGI of $145,000 in 2023 but expect to make $155,000 in 2024. The single-filer limit is $150,000. Your MAGI for 2023 is the lower of the two years, and that is what you will use to determine if your income qualifies. Since one of the years is below the $150,000 threshold, your income qualifies for the tax credit.
Which year are the income limits for?
To qualify for the tax credit, your Modified Adjusted Gross Income (MAGI) must be below the threshold amount for the current taxable year or the preceding year. For example, if it is 2024, then you need to meet the income limits in either 2023 or 2024.
Does this guidance apply to when I ordered the vehicle or when I received it?
The guidance applies to the day you receive your vehicle, not when you order it or put a deposit on it. For example, if you ordered your EV in 2023 and you pick it up in May of 2024, you would follow the guidance that applies in May of 2024 when you take delivery of the vehicle.
What time period does the information on this page cover?
This page covers the time period beginning on January 1, 2024, and onward. This guidance and the list of eligible vehicles will continue to change, so check https://fueleconomy.gov frequently. If you received your car before January 1, 2024, find the correct resource page linked at the top of this page.
How much is the tax credit?
The tax credit is made up of two components. The vehicle is eligible for $3,750 if it meets the critical minerals requirements and $3,750 if it meets the battery components requirement. If it meets both of these requirements, it is eligible for a $7,500 tax credit. If it meets one of these two requirements, it is eligible for a $3,750 tax credit. If it doesn’t meet either of these requirements, the vehicle is not eligible for any federal tax credit.
Still have questions? Contact our EV Support Program.
Disclaimer: The information regarding vehicle eligibility for the Clean Vehicle Tax Credit represents Plug In America’s best understanding of the requirements. This information should not be viewed as a guarantee of eligibility for a tax credit.
