Getting tax credits for an electric vehicle is really complicated. The requirements surrounding where the vehicle was assembled means that two identical brand-new cars sitting on the lot can qualify for EV credits of either $7,500, $0, or something in between!!
How to figure out if your car qualifies? Until now we’ve had to go to the website https://fueleconomy.gov/feg/taxcenter.shtml to find out if your car qualifies. Then in some cases we also needed to check the VIN at https://afdc.energy.gov/laws/electric-vehicles-for-tax-credit.
Starting in ‘24 there’s a lovely new change: the dealership has to do this work! You can transfer your potential credit to them and they’ll knock the credit amount directly off the car when you purchase it. This is very helpful for people who don’t have much income tax liability, or for people who have other credits that factor in first. The only trick here is that you’ll still need to qualify for the credit yourself at tax time by having adjusted gross income that is below $150K a year (single) or $300K a year (joint) for either last year or this year. Otherwise, you’ll have to recapture that tax credit. (No harm comes to you if your income is below these limits for at least this year or last year, though!)
There’s a new credit, too, available for “previously owned clean vehicles”. It’s a non-refundable personal tax credit equal to 30% of the vehicle’s purchase price, up to a maximum of $4,000.
- The vehicle has to be a model year at least two years earlier than the year you’re buying the car in. (So a ‘22 purchased in ‘24 would work.)
- You have to buy it from a dealer, and
- You had to be the only person to ever get this tax credit for this particular car (they track it by VIN)
- And the car needed to have been assembled in the United States (i.e., qualified for the $7500 credit initially.)
Confused? You can look up whether a vehicle qualifies here: https://fueleconomy.gov/feg/taxused.shtml. The same income limitations apply as for new cars, but you can also transfer the credit to the dealership starting in ‘24 to avoid losing it because your income tax is too low.