North Carolina Electric Vehicle Tax Credits & Incentives
Understand the complete financial impact of owning an electric vehicle in North Carolina, including key federal credits and state-level considerations.
Although North Carolina’s state-specific tax credit for electric vehicles (EVs) has expired, residents can use a federal tax credit for new and used clean vehicles. To complete the financial picture, prospective EV buyers must also be aware of the state’s annual registration fees for electric and plug-in hybrid vehicles, which differ from those for traditional gasoline-powered cars.
The Federal Clean Vehicle Credit
The federal Clean Vehicle Credit, governed by Internal Revenue Code Section 30D, provides up to $7,500 for a new qualified plug-in EV or fuel cell vehicle. The credit is split into two $3,750 parts, each tied to battery sourcing requirements. To receive the first part, a percentage of the battery’s critical minerals must be extracted or processed in the U.S. or a country with a free-trade agreement. The second part is contingent on a percentage of the battery’s components being manufactured or assembled in North America.
The buyer’s modified adjusted gross income (MAGI) cannot exceed certain thresholds: $300,000 for married couples filing jointly, $225,000 for heads of households, and $150,000 for all other filers. A buyer can use their MAGI from either the year they take delivery of the vehicle or the preceding year, whichever is lower. The vehicle must also have a battery capacity of at least 7 kilowatt-hours and undergo final assembly in North America.
New vehicles also have Manufacturer’s Suggested Retail Price (MSRP) caps of $80,000 for vans, SUVs, and pickup trucks, and $55,000 for other vehicles. A separate Used Clean Vehicle Credit offers up to $4,000, or 30% of the sale price, whichever is less. To qualify for the used credit, the vehicle’s sale price must be $25,000 or less, and the buyer’s income thresholds are lower: $150,000 for married couples, $112,500 for heads of households, and $75,000 for other filers.
Claiming Available Tax Credits
The traditional method for claiming the credit involves filing IRS Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit, with your annual federal income tax return. You will need the vehicle’s VIN and other details from a report provided by the seller. The credit is nonrefundable, meaning it can reduce your tax liability to zero, but you will not receive any portion of it back as a cash refund.
A more immediate option allows buyers to transfer the credit directly to a registered dealer at the point of sale, which lowers the vehicle’s purchase price. To use this option, the dealer must be registered with the IRS’s Energy Credits Online portal. Even when transferring the credit, the buyer must still file Form 8936 and the associated Schedule A with their tax return to report the transfer.
North Carolina EV Registration Fees
North Carolina levies a supplemental registration fee for all-electric vehicles to help offset the loss of revenue from the state gas tax. The annual fee for an all-electric vehicle is $180. The state also implemented a fee for plug-in hybrid vehicles (PHEVs), and owners are required to pay an annual registration fee of $90.
These fees are paid annually to the North Carolina Division of Motor Vehicles (NCDMV) as part of the vehicle’s registration renewal process. The state budget included provisions for these fees to be adjusted for inflation in future years, meaning the amounts are likely to increase over time.