Electric Cars Are Still Eligible for the $7,500 Federal Tax Credit

Have significant changes in the federal tax credit of up to $7,500 for EVs and plug-in hybrids took effect Jan. 1. The EV tax credit was overhauled in 2022 with new rules for buyer eligibility as well as battery sourcing. The complex battery requirements — aimed to lessen dependence on foreign sourcing of battery components and materials — tighten each year over the 10-year program. That means the list of qualifying vehicles will frequently change as automakers scramble to update vehicles to comply.

The more positive news for 2024, however, is that new-car buyers can choose to get the credit at the time of purchase to reduce the price on the spot. Meanwhile, the credit for used EVs continues, with a similar new option to claim it at purchase, and leasing continues to be an alternative for higher-income buyers and for vehicles not on the purchase credit list.
Which EVs and PHEVs Are Eligible for a Federal Tax Credit?
The tightened rules for 2024 cut the number of new EVs and PHEVs that qualify for the credit by more than half on Jan. 1, and more vehicles will join the list throughout the year as automakers change battery sourcing. Because the rules for 2024 were issued very late in 2023, some automakers still were figuring out which of their vehicles will continue to be eligible — including some from Ford, Nissan, GM and Tesla. In some cases, versions of the same vehicle — such as a regular or long-range variant — may or may not qualify based on differing batteries.

Here are the vehicles currently listed by the EPA as eligible for the new-car tax credit of up to $7,500. This list will be continuously updated (you have to select the year of delivery in the drop down to get the list). The amount of the credit listed is based on the battery size and sourcing. The list also notes the sticker price cap that applies to the specific vehicle. Not all vehicles listed are from the current model year, but they still qualify for the credit if they were never sold before and are delivered to a buyer in 2024.

As noted in the EPA’s list, because a vehicle might be assembled in more than one location and different versions might have different batteries, you also need to check the vehicle identification number of the specific vehicle you want to buy to verify its eligibility. The Department of Energy provides a VIN

Unchanged for 2024 are the limits on how well off you can be to still claim the new-car credit. To qualify, your household income (the “adjusted gross income” on line 11 of your tax return, IRS Form 1040) must be no more than $300,000 for joint filers, $225,000 for heads of households and $150,000 for individuals. The income limit is based on your income in the year you get the vehicle or in the previous year, whichever is lower.

As of Jan. 1, 2024, you have two ways to get the EV tax credit on a new-vehicle purchase. Note that if you ordered a vehicle in 2023 but take delivery of it in 2024, the new rules apply.

The brand-new option in 2024 allows new-car buyers to claim the full credit at the time of purchase. In IRS parlance, you “transfer” or sign over the credit to an IRS-registered dealer; the dealer then gives you that amount in cash or applies it to the cost of the vehicle.

An important sweetener for that option is that as long as you meet the income requirements, the latest IRS guidance says that you can get the full credit at purchase regardless of how much you’ll owe in taxes. However, you still must meet the income limits; otherwise, you’ll have to pay the credit back to the IRS.

Still available — and the only option for those who bought EVs in 2023 — is claiming the credit later with your tax return on IRS Form 8936. If you do this, you can’t get more in credit than the total tax bill you owe (in IRS parlance, the credit is not “refundable”). If the vehicle qualifies for a $7,500 credit but you only owe $4,000 in federal taxes for the year, you’ll “lose” the excess $3,500 you didn’t need.

How much do you need to make to owe $7,500? For tax-year 2024, barring changes in tax law, the incomes needed for a $7,500 tax bill should be close to those for 2023. According to the IRS 2023 Tax Table, to owe $7,500, you’d need a taxable income (IRS Form 1040, line 15) of at least $55,400 as a single filer, $62,700 for a head of household and $66,150 for joint filers. But your situation and deductions could mean you’d need a substantially higher income to owe $7,500.

What Is the Credit for Used EVs?
New for 2023 was a first-ever credit of up to $4,000 for buying a qualifying used EV from a dealer, and now in 2024, used-car buyers can choose to get the credit at the time of purchase. As with new vehicles, you “transfer” or sign over the credit to a registered dealer and the dealer will give you that amount in cash or apply it to the cost of the vehicle; you also get the full credit at purchase regardless of how much you’ll owe in taxes later. But if you exceed the income limits — which are lower for the used credit — you would have to pay back the credit to the IRS. If you claim the credit when you file your taxes (the only option for 2023 buyers), the credit is limited to what you owe in taxes.

The used-car credit is for up to $4,000 or 30% of the sale price, whichever is lower. Additionally, the used vehicle’s sale price must be $25,000 or less, and it must be at least two model years old. Additionally, the buyer’s adjusted gross income is limited to $75,000 for individuals, $150,000 for a joint return and $112,000 for heads of households.