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Understanding the 2024 EV Tax Credit

How Does the EV Tax Credit Work?

The clean vehicle tax credit offers up to $7,500 in non-refundable tax credits when you purchase a new electric vehicle (EV), plug-in hybrid, or fuel cell electric vehicle. While tax credits for EVs have been available for years, 2024 introduces new requirements and processes that could make it easier to afford a new fuel-efficient car, albeit with more stringent qualifications.

Changes to the EV Tax Credit for 2024

In 2024, the EV tax credit has new vehicle requirements and income limits for taxpayers. The most significant change is the way you claim the credit. Starting in 2024, you’ll need an approved time-of-sale report when you purchase your vehicle. This report can be used to claim the credit on your tax return or transferred to your dealer to reduce your vehicle’s final purchase price immediately.

New Vehicle Requirements

Qualifying vehicles must undergo final assembly in North America and meet sourcing requirements for battery components and critical minerals. Vehicles can qualify for a $3,750 credit for meeting battery part requirements and another $3,750 for meeting critical minerals requirements, totaling $7,500. As of February 2024, only eight manufacturers offer eligible vehicles: Chevy, Chrysler, Ford, Jeep, Lincoln, Rivian, Tesla, and Volkswagen. Additionally, passenger cars must have an MSRP of $55,000 or less, and $80,000 or less for vans, SUVs, and light trucks.

Income Limits

To qualify for the 2024 credit, your adjusted gross income (AGI) must be below IRS limits: $150,000 for single filers, $225,000 for heads of household, and $300,000 for married couples filing jointly.

How to Qualify for the 2024 EV Tax Credit

Follow this quick eligibility checklist to determine whether you qualify for the 2024 EV tax credit:

• Your vehicle will be for personal use in the U.S.
• Your income doesn’t exceed IRS limits.
• Choose a qualifying vehicle from the list on FuelEconomy.gov.
• Work with a dealer registered with IRS Energy Credits Online.

If you want to purchase an EV from a manufacturer not on the list, consider buying a qualifying used vehicle to receive a credit of up to $4,000.

How to Claim the Federal EV Tax Credit

If you meet the eligibility requirements and are ready to make a purchase, your dealer will use the IRS Energy Credits Online website to apply for an approved time-of-sale report. You can then decide whether to transfer your credit to reduce your final cost or save it for tax time. To officially claim the credit, complete IRS Form 8936 and submit it with your tax return.

Frequently Asked Questions

Do Electric and Hybrid Cars Really Save You Money?

Yes, electric and hybrid cars can save you money on fuel and maintenance costs over time.

Do Used EVs Qualify for a Tax Credit?

Yes, the used clean energy vehicle credit allows you to receive a credit of up to $4,000 for qualifying used vehicles.

What Is the Income Limit for the EV Tax Credit?

The income limits are $150,000 for single filers, $225,000 for heads of household, and $300,000 for married couples filing jointly.

The Bottom Line

Though meeting EV tax credit requirements is a bit complicated in 2024, a $7,500 price reduction can make a clean energy vehicle more affordable. Applying your tax credit at the point of sale makes the 2024 credit more useful when working with a limited budget.

Even with tax credits, financing a new EV, plug-in hybrid, or fuel-cell EV requires planning and good credit. If you’re considering a new vehicle purchase, now may be a good time to check your credit score and credit report for free with Experian. You’ll get a clearer picture of your financing options so you can explore the best loan opportunities based on your situation.

For any mortgage service needs, contact O1ne Mortgage at 213-732-3074. We are here to help you with the best loan options available!

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