Electric Vehicle Tax Credits

Clean vehicle tax credits

The IRA’s new clean vehicle tax credits are now available and include up to $7,500 per vehicle for new vehicles, up to $4,000 for previously owned EVs and up to 30% for commercial vehicles and buses. Infrastructure tax credits have also been extended through 2032 and the cap has been raised from $30,000 to $100,000.

Previously established sales volume limitations have been removed. Tax credits are now subject to certain domestic sourcing and manufacturing requirements (for new vehicles) as well as vehicle MSRP requirements and income thresholds for individuals and married couples.

In 2022, the Inflation Reduction Act revised the EV tax credit to prioritize cars and batteries built in North America in order to build out a local supply chain. However, starting in 2024, the act stipulates that any vehicle containing battery components from a so-called “foreign entity of concern” (like China) will be disqualified from receiving tax breaks. The same rule will apply to battery minerals in 2025.

Qualifying individuals can receive up to $4,000 in credits for previously owned vehicles, as long as the model year is at least two years earlier than the calendar year in which the vehicle is acquired and its sales price is $25,000 or less.

How to claim the tax credits

Under the Inflation Reduction Act, consumers can choose to transfer their new clean vehicle credit of up to $7,500 and their previously owned clean vehicle credit of up to $4,000 to a car dealer starting January 1, 2024. This will effectively lower the vehicle’s purchase price by providing consumers with an upfront down payment on their clean vehicle at the point of sale, rather than having to wait to claim their credit on their tax return the next year. Only vehicles purchased under the consumer clean vehicle credits are eligible for this benefit. There is also still the option to access your EV tax credits by filing your year-end taxes.

Commercial EV buyers can receive a tax credit up to $7,500 for light-duty vehicles and up to 30% (limited to $40,000) for heavy-duty vehicles.

*Information current as of December 2023. We encourage anyone looking to take advantage of these credits to consult a tax professional prior to making your purchase.