Qualified Plug In Vehicle Credit: How to Qualify
Navigate the federal EV tax credit. This guide explains the interconnected eligibility rules for you, your vehicle, and the purchase to claim this incentive.
The federal government offers the qualified plug-in vehicle credit to encourage the adoption of electric and other clean energy vehicles. This program provides a nonrefundable tax credit for qualifying new and previously owned vehicles, reducing the buyer’s income tax liability. The credit amount and eligibility requirements differ based on whether the vehicle is new or used.
Personal Eligibility Requirements
A primary requirement is that the taxpayer’s modified adjusted gross income (AGI) cannot exceed certain thresholds in either the year the vehicle is delivered or the preceding year. For new vehicles, the AGI limits are $300,000 for married couples filing jointly, $225,000 for heads of household, and $150,000 for all other filers. These income caps are lower for the used vehicle credit.
The vehicle must be for the taxpayer’s own use, not for resale, and used primarily within the United States. The buyer must be an individual, as business use is subject to different regulations. An individual who can be claimed as a dependent on another person’s tax return is not eligible.
The credit is only available to the buyer of the vehicle, meaning an individual who leases a car cannot claim it. While the leasing company that owns the vehicle may be eligible, the lessee has no direct path to claim the credit on their tax return.
New Vehicle Credit Requirements
For a new vehicle to be eligible, its manufacturer’s suggested retail price (MSRP) cannot exceed $80,000 for vans, sport utility vehicles, and pickup trucks. For other types of vehicles, such as sedans, the MSRP cap is $55,000. This price includes any optional equipment added by the manufacturer but excludes destination fees.
The vehicle must also have a battery capacity of at least seven kilowatt-hours and undergo its final assembly in North America. Taxpayers can verify a specific vehicle’s final assembly location by using the Vehicle Identification Number (VIN) on resources provided by the Department of Energy.
The full credit, valued at up to $7,500, is divided into two equal parts of $3,750, each tied to specific sourcing requirements for the vehicle’s battery. These rules are designed to encourage domestic supply chains for electric vehicle components.
Critical Minerals
To qualify for the first $3,750, a specific percentage of the value of the critical minerals in the vehicle’s battery must be extracted or processed in the United States or a country with which the U.S. has a free-trade agreement. For 2024 and 2025, this threshold is 60%. Starting in 2025, vehicles will be ineligible if any of their critical minerals are sourced from a “foreign entity of concern,” which includes companies influenced by governments of countries like China and Russia.
Battery Components
To qualify for the second $3,750, a certain percentage of the value of the battery’s components must be manufactured or assembled in North America. For vehicles placed in service in 2024 and 2025, at least 60% of the battery components must meet this standard. As of 2024, vehicles containing battery components from a foreign entity of concern are disqualified from receiving this portion of the credit. A vehicle can qualify for one part of the credit without qualifying for the other.
Used Vehicle Credit Requirements
The Credit for Previously-Owned Clean Vehicles has a maximum purchase price capped at $25,000. This price includes any dealer-imposed fees but excludes government-mandated charges like taxes and registration fees. This is a firm limit on the sale price, not the vehicle’s original MSRP.
To be eligible, the vehicle’s model year must be at least two years earlier than the calendar year of the purchase. For example, a vehicle purchased during 2025 must have a model year of 2023 or older. The vehicle must be purchased from a licensed dealer, as sales between private individuals do not qualify for this tax credit.
The credit can only be claimed once for any given used vehicle. The credit amount is 30% of the vehicle’s sale price, with a maximum value of $4,000. The income limits for the used vehicle credit are lower: $150,000 for joint filers, $112,500 for heads of household, and $75,000 for all other filers.
Information and Documentation Needed to Claim the Credit
To claim the qualified plug-in vehicle credit, you need the seller’s report, which the dealer is required to provide at the time of sale. This report, sometimes called Form 15400 or a time-of-sale report, contains the details needed for tax filing. The dealer must also submit this information to the IRS.
The seller’s report must include the names and taxpayer identification numbers (TINs) of both the buyer and the dealer. It will also list the vehicle’s VIN, its battery capacity, the date of the sale, and the final sale price. For new vehicles, the report verifies that the buyer is the original user and states the maximum credit amount the vehicle is eligible for.
The information from the seller’s report is used to complete IRS Form 8936, Qualified Plug-In Electric Drive Motor Vehicle Credit. This is the official form used to calculate and claim the credit on your tax return.
How to Claim the Credit
A buyer has two paths to claim the credit. The first method is to claim the credit directly on an annual tax return. The second option allows for the transfer of the credit to the dealer at the point of sale for an immediate benefit.
To claim the credit on a tax return, the completed Form 8936 must be attached to the taxpayer’s Form 1040 for the year the vehicle was placed in service. The credit is nonrefundable, which means it can reduce a taxpayer’s tax liability to zero, but no portion of the credit will be issued as a cash refund. Any excess credit cannot be carried forward.
As an alternative, a buyer can transfer the credit to a registered dealer at the time of purchase for an immediate discount or cash back. To do this, the buyer must attest to their eligibility and formally agree to the transfer at the dealership. Even when the credit is transferred, the buyer must still file Form 8936 with their tax return to report the transaction.