Tax Credits - Does Your New EV Qualify?

Two plugin electric vehicles charge on a cobblestone street next to open fields on a sunny day
(EVs charging on a sunny day. Image by (Joenomias) Menno de Jong on Pixabay.)

July 5, 2024. It’s a date that, well, most Americans probably paid little attention to. Whether they marked it or not, however, it’s a date that may have a sizable impact on their finances. It’s the day new rules went into effect in the US Treasury regulations to make financial incentives stronger for buying electric vehicles (EVs).

How? By means of tax credits.

The Inflation Reduction Act

Signed into law by President Biden just over two years ago, the Inflation Reduction Act (IRA) is “the largest investment in clean energy and climate action” ever undertaken by the US government.

Although there were many provisions of the Act intended to benefit the environment, not all were meant to assist Americans financially. Many were, however, including provisions regarding tax credits for the owners of EVs and solar panels. Now the law has been revised, including some of those provisions, and taxpayers want to know how their EV can save them money on their taxes.

New EVs

Drivers of qualifying new plugin EVs have been eligible for tax credits since the Energy Improvement and Extension Act of 2008 became law. Now there are new eligibility requirements to determine which vehicles qualify for the credits.

Before the IRA was revised, the amount of the tax credit for new EVs was calculated based on the capacity of their battery as follows:

Under the revised law, while the maximum amount has not changed, the way that amount is calculated has, and the new calculations are all about location, location, location.

Globe turned to show the North American continent from above
(North America. Photo by Lara Jameson on Pexels.)

But what do these requirements have to do with location?

There are also additional requirements that must be met:

The taxpayer may–but is not required to–transfer the credit to another entity, such as a dealer. This is one way of claiming the credit, and it can reduce the sale price of the vehicle at time of purchase. The other, more direct way of claiming the credit is to file Form 8936, Clean Vehicle Credit.

Used EVs

If you bought or are thinking of buying a used EV, you may also qualify for a tax credit, though the amount of the credit will be smaller. Here’s what you need to know:

Digital drawing of a white woman wearing a white shirt, dark pants, and dark heels holding a "for sale" sign in front of a black sedan
(Car for sale. Image by Mohamed Hassan from Pixabay.)

The Seller’s Report

Sellers are required to provide a time-of-sale report to the IRS known as a Clean Vehicle Seller Report (Form 15400) to confirm that the vehicle being sold is eligible for the credit. They also have to provide the buyer with a copy of the accepted report within three calendar days, but you can request it before you leave with the vehicle. If the EV began to be used on or after January 1, 2024, the seller has to submit this report through the IRS Energy Credits Online (ECO) portal, which should almost always let the seller know whether the IRS has accepted or rejected the report. Once you receive it, keep it in a safe place.

Check Yourself

Want to check your vehicle’s eligibility yourself? You can do so at fueleconomy.gov. You can also review IRS Publication 5866, The New Clean Vehicle Tax Credit Checklistfor new vehicles or this IRS list of manufacturers and models for used vehicles.

More Info

Want to drill down into details? Check out the IRS Clean Vehicle Tax Credits page to learn more.


Originally published at Toward Zero Waste on August 26, 2024