How to File for EV Tax Credit Step by Step

Electric vehicle (EV) tax credits can significantly lower the cost of purchasing a new or used EV, but claiming them requires careful attention to eligibility rules and documentation. Many buyers miss out on these savings due to confusion over the process.

Understanding how to properly file for the credit ensures you receive the full amount. The process involves gathering necessary documents, completing IRS forms correctly, and addressing potential issues.

Eligibility Requirements

Qualifying for the federal EV tax credit depends on the vehicle’s specifications, the buyer’s income, and how the car is used. The Inflation Reduction Act of 2022 introduced new rules, particularly regarding where the vehicle is manufactured and the sourcing of its battery components. To qualify, the EV must be assembled in North America, and its battery must meet domestic sourcing thresholds that increase annually. In 2024, at least 50% of battery components must be made or assembled in North America, and 40% of critical minerals must come from the U.S. or a free trade agreement partner.

Income limits also apply. The credit is unavailable to individuals with a modified adjusted gross income (MAGI) above $150,000 for single filers, $225,000 for heads of household, or $300,000 for joint filers. These limits apply to either the year of purchase or the prior tax year, allowing some flexibility. Additionally, the credit is only available for new EVs with a manufacturer’s suggested retail price (MSRP) below $55,000 for sedans and $80,000 for SUVs, trucks, and vans.

Used EVs qualify for a separate credit of up to $4,000 but must be purchased from a dealer, be at least two years old, and have a sale price under $25,000. Leased EVs follow different rules, as the tax credit is claimed by the leasing company, not the individual. Some lessors pass the savings to customers through lower lease payments, but this is not guaranteed. Vehicles purchased for business use may qualify under separate provisions.

The credit is nonrefundable, meaning it can only reduce tax liability to zero and does not result in a refund if the credit exceeds the amount owed.

Gathering Relevant Documents

Having the right documentation is necessary to avoid issues when claiming the EV tax credit. The purchase agreement from the dealership is essential, as it verifies the vehicle identification number (VIN), purchase date, and sale price.

Buyers should also obtain a manufacturer’s certification statement, which confirms that the vehicle qualifies for the federal tax credit. This document is typically provided by the dealership or can be found on the manufacturer’s website. If unavailable, the IRS maintains a list of eligible vehicles, but buyers should verify details to ensure compliance with current regulations.

Income-related documents, such as W-2 forms and 1099 statements, are necessary to determine if the buyer falls within the income limits. Since the credit can be claimed based on either the current or prior tax year’s income, having both sets of documents allows individuals to choose the most favorable option.

For those financing their EV purchase, loan documents may be useful, particularly if the vehicle was bought through a special financing program that includes incentives or rebates. While these do not directly affect eligibility, they help clarify the total cost of the vehicle. Buyers who receive state or local EV incentives should also retain documentation of these benefits, as some may impact the federal credit amount.

Completing Applicable Tax Forms

Once all necessary documents are gathered, the next step is filling out IRS Form 8936, “Qualified Plug-in Electric Drive Motor Vehicle Credit.” This form calculates the credit amount and must be attached to the taxpayer’s federal income tax return, typically filed using Form 1040.

Supporting Schedules

Form 8936 requires details about the vehicle, including the make, model, VIN, and purchase date. The credit amount varies based on battery capacity and compliance with sourcing requirements. For new EVs, the maximum credit is $7,500, split into two parts: $3,750 for meeting battery mineral sourcing rules and another $3,750 for battery component sourcing. If the vehicle only meets one of these criteria, the credit is reduced accordingly.

For used EVs, the credit is 30% of the purchase price, up to a maximum of $4,000. Taxpayers must confirm that the vehicle was purchased from a dealer and meets the age and price requirements. If the EV is used for business purposes, a portion of the credit may need to be reported on Form 3800, “General Business Credit,” instead of being fully applied to personal tax liability.

Form Accuracy Checks

Before submitting the tax return, reviewing all entries on Form 8936 and related schedules is necessary to prevent errors that could lead to IRS scrutiny. A common mistake is entering an incorrect VIN, which can cause the credit to be denied. Taxpayers should double-check this number against their purchase agreement.

Another frequent issue is miscalculating the credit amount, particularly for vehicles that only qualify for a partial credit. Since the IRS updates eligibility criteria annually, taxpayers should verify the latest requirements on the IRS website or consult IRS Notice 2023-9, which provides guidance on credit calculations. Additionally, the credit cannot exceed the total tax liability for the year, meaning taxpayers with little or no tax owed may not benefit fully. Adjusting withholding or estimated tax payments in future years may help maximize the credit’s value.

Submitting Final Return

Once all forms are completed and reviewed, the tax return can be filed electronically or by mail. E-filing is generally recommended, as it reduces processing time and minimizes errors. Taxpayers using tax software should ensure it supports Form 8936, as not all platforms include this form by default. Those working with a tax professional should provide all relevant documents in advance to avoid last-minute complications.

If filing by mail, including a copy of the purchase agreement and manufacturer’s certification statement can help substantiate the claim in case of an IRS review. While these documents are not required to be submitted with the return, having them readily available can expedite resolution if the IRS requests additional verification. Taxpayers should retain all related records for at least three years, as the IRS may audit returns within this period.

Addressing Partial or Denied Credits

Receiving a reduced or rejected EV tax credit can be frustrating. One common reason for a partial credit is that the vehicle only meets some of the battery sourcing requirements, which split the $7,500 credit into two equal parts. If a vehicle qualifies for only one portion, buyers will see a reduced credit amount on Form 8936.

Denials can result from incorrect or incomplete tax filings, such as failing to properly document the vehicle’s eligibility or misreporting income. The IRS may disallow the credit if a taxpayer incorrectly claims a vehicle that does not meet the latest Treasury Department guidance on qualifying models. Some buyers mistakenly assume all EVs are eligible, but manufacturers must adhere to evolving domestic content rules. Taxpayers who purchased an EV near the end of the year should also verify which credit rules applied at the time of purchase, as IRS guidance can shift with new regulations.

Actions After Filing

Once the tax return has been submitted, tracking its status ensures there are no unexpected issues. The IRS allows taxpayers to check their return status through the “Where’s My Refund?” tool or their IRS online account. While the EV tax credit itself is nonrefundable, meaning it won’t generate a direct payment, it can still impact the overall tax situation by reducing liability. If the credit eliminates all owed taxes, any excess payments made throughout the year via withholding or estimated taxes may result in a refund.

If the IRS requests additional documentation, responding promptly can prevent delays. Common requests include verification of the VIN or proof of purchase. Taxpayers who receive a notice of adjustment should review the IRS explanation carefully, as errors in processing are possible. If the credit was incorrectly reduced or denied, filing an amended return using Form 1040-X may be necessary. If the IRS upholds a denial, taxpayers can appeal the decision through the IRS Independent Office of Appeals, which provides an opportunity to present supporting evidence.