What Is the EV Tax Credit?

The EV tax credit explained

To qualify for the EV tax credit, you must also earn below a certain income threshold. Specifically, your modified adjusted gross income (MAGI) must be less than the following on your most recent taxes. Here’s how the EV tax credit works in a nutshell:

1. First, you purchase a new or used EV that’s on the government’s lists of approved vehicles.
2. Next, the dealer selling the car receives the tax credit and either lowers the price accordingly or pays you cash in return. If you buy from a private party, you receive the credit as a discount on your taxes when you file next year.
3. Finally, you file Form 8936 with the IRS the next time you do your taxes — even if the dealer took the tax credit.

Which new EVs qualify for the tax credit?

Technically speaking, the $7,500 new EV tax credit is really two separate $3,750 tax credits, and some vehicles only qualify for one or the other:

• You get the mining credit if a certain percentage of the minerals in your car’s battery were sourced from the U.S. or a country we have a free-trade agreement with.
• You get the battery credit if a certain percentage of your EV’s battery was assembled in North America.

The Ford Mustang Mach-E, Chevrolet Blazer EV and base trim Tesla Model 3 no longer qualify as of 2024.

Qualifying vehicles must also be assembled in North America and have MSRPs below $55,000 for cars and $80,000 for trucks, vans, SUVs and crossovers.

As a result of these and other restrictions, the list of brand-new EV models that qualify for the full $7,500 is just eight entries long. (Some of those models even have trims that don’t qualify at all.)

Compare qualifying makes and models

Below, you can see the complete list of vehicles and trim levels that qualify for at least one of the two $3,750 tax credits.

Do leased vehicles qualify for the EV tax credit?

Leased vehicles technically qualify for the EV tax credit, but lessees aren’t the ones getting the benefits because the manufacturers actually own leased vehicles.

That being said, some automakers and dealerships have used their tax savings to offer better overall lease terms.

Which used EVs qualify for the tax credit?

For used EVs, the qualifications are a little different, and the maximum tax credit is lower at only $4,000. To qualify, you must be the second owner of the vehicle (the credit only applies to the first transfer), and the car must be at least two model years old (e.g., a 2023 or older in 2025).

Additionally, the sale price of the vehicle must be below $25,000. That’s a low bar, and it may instantly disqualify most 2020 or newer luxury EVs, like the Porsche Taycan or BMW i8. (That is, unless you find a miracle of a deal.)

Over 100 used models can qualify for the EV tax credit as of publishing.

There’s a longer list of more minute requirements, so to keep things simple, the government maintains a running list of all pre-owned EVs and PHEVs that qualify, provided you find one for under $25,000. (We’d include the list here, but it’s too long.)

Lastly, it’s worth noting that the used EV credit isn’t $4,000 across the board. The amount you receive is up to 30% of the vehicle’s price, which means all cars listed for more than $13,333 will earn the buyer a $4,000 credit. Those that cost less will only earn the buyer less.

Still, $4,000 off an EV that costs anywhere from $13,333 to $25,000 isn’t too shabby. That can cover quite a lot of charging (or even a home charger install).

Is the EV tax credit worth it now?

Whether the EV tax credit makes buying an electric vehicle worth it depends on what kind of buyer you are:

• Were you already determined to purchase an EV?
• Or are you considering whether the tax credit makes getting an EV more affordable than a hybrid or a gas-powered car?

“The electric vehicle tax credit is not a good reason to buy an electric car,” Lauren Fix of Car Coach Reports said. (Fix is also a member of ConsumerAffairs’ advisory panel.) “If you owe over $7,500 in federal taxes, this can cover your taxes owed — but you have to purchase a vehicle that is a large expense.”

“When figuring out if this purchase makes sense, add in all your costs, including insurance, installing a charging station by a certified electrician, your charging costs, depreciation, payments and cost of ownership,” added Fix.

The sweet spot might be to purchase a used EV that qualifies for the $4,000 tax credit but is still well within its EV warranty period. But even then, if you’re looking for a dependable, low-cost vehicle that’s also highly fuel efficient, a gently used hybrid might be a better bet.

Bottom line

Assuming you were already gearing up to buy an EV anyway, the EV tax credit may actually be a good reason to act sooner rather than later. The restrictions have been getting tighter each year — and now the credit is going away entirely in September of 2025.

If you were going to buy a qualifying EV anyway, the tax credit is just icing on the cake.

We’re big fans of renewable energy, but from a consumer’s perspective, owning an EV is still an expensive prospect. Sure, you could still get back up to $7,500. But EVs are also more expensive to buy, more expensive to insure and less dependable overall than their hybrid- and gas-powered equivalents.

A used EV may be less expensive upfront, but pre-owned EVs have their own set of challenges, ranging from faster-than-average depreciation to unknown battery longevity. Many are just as expensive to own and operate as new EVs.

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