Clean Vehicle Tax Credit or EV Tax Credit

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The EV or Clean Vehicle Tax Credit has been adjusted for recently purchased qualifying vehicles. To qualify for the new Clean Vehicle Credit and to claim the credit on your current year return, the vehicle needs to have been purchased and placed into service before the end of the year in question. To claim it on a previous year return or back taxes, the vehicle needs to be purchased and placed into service in the year you are claiming it. The IRS defines being placed into service as the date at which the purchaser takes delivery of the vehicle. See IRS Clean Vehicle Tax Credit information.

The latest IRS tax credit updates on electric vehicle purchases:

• If you purchased after August 16, 2022 or before
• If you purchased during 2023 or after .

What electric vehicles qualify for the Clean Vehicle Credit? | Do hybrids qualify for the new Clean Vehicle Credit? | How to claim the EV tax credit up front?

Clean Vehicle Tax Credit

As part of the Inflation Reduction Act (IRA), the newly revised EV tax credit has been reintroduced with some enhancements, now being called the Clean Vehicle Credit instead of the much longer Plug-In Electric Drive Motor Vehicle Credit. Do you qualify? How much is it worth?

Key Takeaways:

• You may be able to claim a tax credit of up to $7,500 for a newly purchased plug-in electric vehicle or a plug-in hybrid.
• Claim the tax credit for a vehicle you purchased and placed into service - buying and using a new EV this year will qualify you to claim it on your next tax return.
• The vehicle must be assembled in the United States and must cost under $55,000 for cars or $80,000 for pickup trucks, SUVs, and vans - see details in the table below.
• You are generally eligible if your adjusted gross income or AGI is $150,000 for singles. $225,000 for heads of household, and $300,000 for married taxpayers.
• For vehicle purchased after December 31, 2023 and before Dec. 31, 2032, you may be able to claim the credit in advance and pay it towards the purchase of the vehicle.

The EV tax credit is still worth up to $7,500 and will last for ten years through 2032. As many are noticing, due to inflation, there are currently few electric vehicles on the market which qualify for the credit due to the pricing restriction. Find more details below in the table before purchasing your next vehicle.

How to Claim the EV Tax Credit

Attention: This page has a lot of information! Rather than comb through exhausting details in the IRS' latest 11,600 word document on this complicated tax credit, get your taxes on on eFile.com. After purchasing your new EV, add your details to your account and eFile will calculate your credit for you. Follow these simple steps to claim your EV tax credit:

1. Research, choose, and buy the right EV for you that fits the criteria - refer to table.
2. Retain documents, receipts, and all paperwork for the vehicle - the VIN is needed.
3. Get your full credit: this credit is nonrefundable meaning you cannot be paid the full $7,500 if you are owed a tax refund or do not owe taxes. Therefore, we recommend withholding less in taxes or making less estimated tax payments so your return results in enough taxes due to use up your entire EV tax credit. Only do this for the year you purchased the vehicle, then revert back to normal withholding.
4. Sign up for an eFile account and enter all your income and tax information.
5. Answer the questions regarding your EV purchase and enter the VIN or vehicle identification number.
6. Watch your taxes owed drop by the amount of your credit.

Tax Credit for Buying a New Electric Vehicle or EV

Can I claim a tax credit for buying a new Tesla? What about a new Hyundai electric car? What if I bought a used electric car?

If you purchased an electric or alternative motor vehicle this year, you may be able to claim credit on your next tax return. You may also be able to amend a tax return to claim credit if you purchased it in a previous year and owed taxes. This tax credit is nonrefundable and will only offset your tax liability for a given tax year. The EV tax credit details can be found below; learn about the Tesla EV tax credit, Chevy Bolt EV credit, Nissan LEAF credit, and more of the best electric cars which may be eligible for this federal vehicle credit.

Related: How to invest in Tesla stocks and other passive income ideas.

These vehicle tax credits are available for current year tax returns:

• Clean Vehicle Credit
• Alternative Motor Vehicle Tax Credit.

This credit is also valid for many qualifying plug-in hybrid electric vehicles.

When you prepare and e-file your next tax return on eFile.com, you don't need to worry about which of the credits above you qualify to claim on your tax return. Simply answer a couple of questions and the eFile app will select the correct tax credit form(s) for you to complete. The app will also calculate and enter your credit amount on your return. See how much your tax refund could be and prepare to prepare for Tax Day.

Does the Electric Vehicle Tax Credit Run Out?

To claim the credit on eFile.com, you can prepare and eFileIT Form 8936, Clean Vehicle Credits along with Form 1040. The credit needs to be claimed for the year which the vehicle was purchased. The tax credit does not carryover or carry forward if you do not use it; in other words, if you did not use the part of the personal portion of the EV tax credit, then the unused credit is lost.

If you bought a qualifying vehicle in a recent year and you did not claim it on your tax return, you can still get the credit by filing an amended return. Claim this credit when filing your next tax return on eFile.com.

Vehicles that Qualify for the Clean Vehicle Credit

These vehicles are confirmed to qualify for the newly enhanced Clean Vehicle Credit. These vehicles need to be placed into service or delivered on or after April 18, 2023. This list is consistently updated as the IRS confirms vehicles.

How do you know if you qualify? If you are single and make under $150,000 in a year, head of household and make under $225,000, or married filing jointly making under $300,000, and you purchase a qualifying vehicle from the table below, you should qualify.

How Did the EV Tax Credit Change?

The details below summarize the important details of the newly changed tax credit for electric vehicles.

• As a qualified buyer, you will put the vehicle into service, not resell it, and you will only claim this credit once in a three-year period.
• The credit can be claimed for the return in which the vehicle was placed into service (i.e. a vehicle purchased and driven this year will be reported on this year's tax return).
• The 200,000 vehicle cap was removed, thus certain Tesla and GM vehicles may qualify for the credit.
• To qualify for the EV tax credit, the vehicle:
  • Has an external charging source
  • Has a gross vehicle weight rating of less than 14,000 pounds
  • Has a minimum battery capacity of 7 kilowatt hours - increased from 5
  • Finished assembly in the U.S. - details below.
• An EV vehicle purchased after August 16, 2022 must also be assembled in North America and the critical materials for the battery must be from the U.S. or a country with whom the U.S. has a free trade agreement with. In general, North America includes the United States and Puerto Rico, Canada, and Mexico for purposes of determining the location of final assembly.
• To see if your vehicle meets the assembly requirements, check the Department of Energy's page on Electric Vehicles with Final Assembly in North America. On that page you can:
  • Confirm the assembly location for your specific vehicle using the VIN Decoder tool under "Specific Assembly Location Based on VIN."
  • Check a list of qualifying electric vehicles under "For Vehicles Purchased before January 1, 2023."
  • Because some models are built in multiple locations, you should check both criteria for any specific vehicle.
• The maximum MSRP or price of the vehicle must not exceed $55,000 for cars or $80,000 for SUVs, trucks, and vans. This means most Tesla vehicles will not qualify for the credit.
• To claim the credit, the purchaser's adjusted gross income cannot exceed $150,000 for the year for singles, $225,000 for heads of household, or $300,000 for married filing jointly to prevent wealthier Americans from taking advantage of additional tax savings.
• The credit is for used electric vehicles through the Previously-Owned Clean Vehicles Credit, limited to $4,000 for cars priced at $25,000 or less. This has a lower income cap at $75,000 for singles, $112,500 for heads of household, or $150,000 for married couples.
  • The vehicle must be at least two years older than the year the vehicle is being claimed and it must meet the power and weight qualifications for the Clean Vehicle Credit.
  • The purchaser must not be the original owner, must not have claimed the credit in the last three years, can't be a dependent, must meet the income threshold for their filing status, and must purchase the vehicle from a qualified dealer, not a private sale.
• The credit can also be claimed for commercial vehicles through the Credit for Qualified Commercial Clean Vehicles which follows similar guidelines as described. The vehicle cannot get any "double benefit" - i.e. it cannot be claimed for both the Clean Vehicle Credit and the commercial credit (the VIN is required to prevent this).
• The credit can only be claimed once per vehicle, meaning once it is claimed on a new vehicle based on the vehicle identification number or VIN, then it cannot be claimed again if sold as a used vehicle. This is why the VIN is required to be reported on the tax return when reconciling the credit.
• You may also be able to claim a credit for installing an alternative fueling property for your vehicle through the Qualified Alternative Fuel Vehicle Refueling Property which includes EV charging stations. See details on energy efficient improvements to your home.

If you return or resell the vehicle within 30 days, you will not be eligible for the credit and the vehicle itself is no longer eligible for the credit since it was claimed and the vehicle was used. If you trade or sell the vehicle after 30 days, there is no recapture or repayment of the credit.

If you cancel the sale before using the vehicle or take possession of the vehicle, then you are no longer eligible for the credit, but the vehicle itself remains eligible.

All of the above information also applies to plug-in hybrid vehicles.

How the EV Tax Credit Is Changing (Again) in 2024

Through a transfect election, the entire credit could be claimed upfront or at the point of sale starting in 2024, going towards the cost of the car; this means the credit will be paid in advance directly to the dealer. Qualified EV dealers and salespersons are to address the value of the allowed credit for the vehicle(s) in question prior to the sale. This means the EV tax credit could be used in the form of cash or as a partial payment or down payment towards the vehicle. The IRS aims to issue a direct deposit or ACH payment of the credit within 2-3 business days to the dealer.

When taking the credit, you are required to file taxes for that year and must include the details of your credit and purchase. If you claim the credit when buying the vehicle and were ineligible for it or your tax refund is subject to recapture, you do not need to pay this credit back. In other words, advance payments of this credit that go to purchasing the vehicle do not need to be repaid if you do not owe taxes. Any excess amount of the credit taken is not subject to recapture from the buyer or dealer.

Because it is a tax credit, whether taken as a cash payment or paid directly towards the vehicle, this credit is not included in the gross income of the taxpayer and is not deductible for the dealer or salesperson.

When purchasing the vehicle, you must show the dealer proof of your identity (SSN or ITIN), a license or identification, documentation that your AGI is not expected to exceed the limits for the credit, an attestation that you will use the vehicle for personal use (new vehicles), proof that you will file a tax return for the year you are purchasing the vehicle, an agreement that if your AGI is over the limit that you will repay the credit, and an agreement that you elected to transfer the credit. Note that dealers are not liable for repayment, the buyer is.

If the vehicle is returned within 30 days, then the buyer is responsible for the repayment or recapture or the transferred credit and the vehicle is no longer eligible for the new EV tax credit.

The IRS allows two transfer elections per year, such as for purchasing two qualifying clean vehicles in the same year - two new vehicles, one new and one used, but not two used.

There are many requirements and regulations that dealers need to follow - be sure that the dealer you are going through is aware and compliant with these before proceeding with your purchase.

Qualified Plug-In Electric Drive Motor Vehicle Tax Credit

Note: The below information applies to taxes prior to 2023.

The Qualified Plug-In Electric Drive Motor Vehicle Credit, commonly referred to as the federal EV tax credit, can be worth up to $7,500 in nonrefundable credit.

The first EV tax credits were introduced under President George W. Bush in 2008. You may be able to claim a tax credit for placing a new, qualified plug-in electric drive motor vehicle into service. Generally, most electric vehicles qualify for the credit and all typically earn you the full amount of $7,500, but there are some criteria.

Key points on how the EV tax credit works:

• The vehicle was purchased new,
• It has a 5 kilowatt hour storage battery which is charged externally,
• The electric vehicle or EV weighs less than 14,000 pound, and
• The credit is being claimed for the year the vehicle was purchased and put into service.

This is a vehicle that, under IRS Section 30D, weighs less than 14,000 pounds, runs significantly by an electric motor, draws electricity from a battery that holds at least 4 kilowatt hours, and is capable of being recharged from an external source of electricity. This means it cannot be a traditional hybrid vehicle, or HEV, as it does not draw power externally. See information regarding hybrids and plug-in hybrids that may qualify for the credit.

The vehicle in question must be purchased new - it cannot be used and/or leased for you to receive the credit. The IRS tax credit for 2022 and earlier ranges from $2,500 to $7,500 per new electric vehicle (EV) purchased for use in the U.S. This nonrefundable credit is calculated by a base payment of $2,500, plus an additional $417 per kilowatt hour that is in excess of 5 kilowatt hours. This value cannot exceed $5,000, thus limiting the total credit to $7,500. (Note: a nonrefundable credit is an amount that only goes towards the taxpayer's tax liability. If you are expecting to owe $5,000 in taxes, but file for a $7,500 credit from a recently purchased electric car, you would expect to see $5,000, eliminating the difference of $2,500). This credit does not carry forward and must be used for the year it was purchased.

The electric car tax credit is similar to a rebate in that you cannot use it to purchase the vehicle, but can claim it after your purchase the vehicle. However, it is also unlike a rebate because it is not refunded you since nonrefundable tax credits can only be used to offset any taxes you may owe.

This credit can also be applied to a two-wheeled vehicle if certain circumstances are met. These are:

• The vehicle was purchased new,
• It can reach a speed of 45 miles-per-hour or more,
• It draws significant power from an electric motor,
• The battery has a minimum capacity of 2.5 kilowatt hours,
• It can be charged externally, and
• The vehicle weighs less than 14,000 pounds.

The credit for two-wheeled vehicle can be claimed for 10% of the cost of the vehicle in consideration up to a maximum of $2,500.

Important: the phaseout information here applies only to vehicles purchased prior to 2023.

The credit began to phase out when at least 200,000 qualifying vehicles manufactured by each company had been sold in the U.S. The only two companies to begin phasing out were Tesla and General Motors. Once the process began, purchasers of electric vehicles were eligible to claim 50% of the credit if the vehicle was acquired in the first two quarters that the 200,000 limit had been reached. If filing for a vehicle purchased in the second two quarters, file for a nonrefundable credit amounting to 25% of the original amount. To see an example of this, find the amounts for General Motors or Tesla in the table below. Both Tesla and GM have finished this process; if you purchased either of these vehicles in 2022, they are not eligible for a tax credit.

Eligible Vehicles for the Original EV Tax Credit (2022 and Prior)

All of the following electric vehicles qualify for the credit for Qualified Plug-In Electric Drive Motor Vehicles. They have different credit amounts depending on the power output of the battery:

*Companies who initiated phasing out indicate different, decrementing values based on the year purchased. Only General Motors and Tesla finished this process, making them ineligible for the credit for vehicles purchased in 2022.

See a list of qualifying plug-in hybrids.

In addition to these nonrefundable credits, different states offer rebates to encourage taxpayers to invest in electric vehicles. For example, California offers an EV tax credit in the form of a cash rebate up to $7,000 for a taxpayer who purchases a new electric vehicle. This is the state's Clean Vehicle Rebate Program or CVRP which is good for plug-in hybrid vehicles, battery electric vehicles, and fuel cell electric vehicles.

Should an electric vehicle be purchased for business purposes, it may be eligible for the credit and claimed on Form 3800, General business Credit - eFileIT.

In 2021, United States electric vehicle sales grew to over 430,000 units in the year, increasing from 2020. In 2020, the number of EV or electric vehicles decreased to 322,000 from 2019 where around 329,000 electric vehicles were sold, all according to the U.S. Department of Energy. Some of the most popular all electric vehicles were from Tesla, including the Model 3, Model X, and Model S, with the Model 3 selling almost 300,000 units in 2018 and 2019 combined. The Nissan Leaf sold more than 10,000 units in each year, 2018 and 2019.

Do you own any of the vehicles in this list or want to invest in one? Get the most out of that purchase when you file your taxes. Claim the credit online on Form 8936.

Is there a Loophole for the EV Tax Credit?

The 2023 credit is restricted to vehicles assembled in the U.S., but there may be an EV leasing tax loophole to claim the credit on vehicles that otherwise would not qualify. Because the business EV tax credit does not have this restriction, the business or car dealer may be able to pass the savings along to the buyer for a leased vehicle. This EV lease tax loophole may be available to take advantage of during 2023 and future years.

Charging Costs and Electric Vehicles

How much does it cost to charge a Tesla? Can you charge an electric vehicle overnight at home?

Depending on the state, electric car charging stations can be found in more populated areas of the U.S. where more EVs are present. Owners can also charge their Tesla or other electric car at home. How long it takes to charge an electric car and how much it costs depends on the charging conditions.

Most all-electric vehicles have similar battery storage sizes, so they all require the same power output to charge and will take similar amounts of time to fully recharge. The cost to charge an electric vehicle depends on the storage of the battery. For example, the Tesla Model X has a 100 Kilowatt hour (kWh) battery. Assuming the average cost of electricity in the United States of around 14 cents per Kilowatt hour ($0.14/kWh) according to the Energy Information Administration or EIA, the cost my vary based on the charging set up. Additionally, there is power loss in AC chargers, typically resulting in an efficiency of 80-90%. The examples below assume charging from a power level of 0 to 100 or full charge.

• Level 1 AC charging
  • Standard, universal charging from a common home outlet or wall socket. The charge will take days instead of hours which is much longer in comparison to level 2 AC charging. This can be anywhere from 20-40 hours and will add up to $14.00 for a full charge or more if accounting for lost power. Depending on how often the vehicle is used and charged, consider this when purchasing an electric vehicle you plan to charge at home.
• Level 2 AC charging
  • Offered by Tesla as well as other third party manufacturers. These chargers are similar to an outlet used for an at-home dryer or other large appliance and can be simply installed by an electrician or other specialist. Tesla and other companies recommend installing this type of charger at home. Charging with a level 2 system can charge overnight, or around 8-12 hours for a full charge up to $14.00 in electricity. The amount does not vary since the cost is based on how much power is output into the battery, not the amount of time it is charged.
• Level 3 DCFC or Tesla Supercharger
  • DCFC or direct current fast chargers abandon the alternating current (AC) method and require much more power, but offer far superior charging speeds at under an hour. Since this requires more power, the average cost for this electricity increases, according to the EIA, to around $0.22 or 22 cents per kWh. The charging is much more efficient at around 90-99%. Using the Model X, this would be around $23.00 to fully charge at 100 kWh.

With widespread competition, electric vehicle range in prices. There are Kia electric cars, electric vehicles from BMW, and the well-known Tesla. Consumers may be able to purchase electric vehicles for prices they are used to for traditional gas vehicles, like the cheapest electric cars starting at $30,000. This goes up to the most expensive electric vehicles like those from Porsche, Audi, and Mercedes-Benz which may start at around $100,000.

Alternative Motor Vehicle Tax Credit

The Alternative Motor Vehicle Tax Credit can be claimed for placing a qualified fuel cell vehicle in service and may only be claimed by the original purchaser of the vehicle. A qualified fuel cell motor vehicle is a vehicle propelled by power from one or more cells which convert chemical energy directly into electricity. Currently, hydrogen fuel cell electric vehicles qualify. eFile.com can be used to generate the information for Form 8910 - FileIT - to claim the credit and attach it to your next tax return. You can prepare and file these forms on eFile.com. Once you answer a few simple questions about your tax situation, we will generate the forms for you and help you complete them accurately.

Only partnerships and S corporations should report it on Form 3800, General Business Credit. Other taxpayers, when filing on eFile.com, will use the eFile app to report the information on Form 8910, Alternative Motor Vehicle Credit.

Below is a list of some certified fuel cell motor vehicles that may qualify for the credit:

• 2008-2012 Honda FCX Clarity
• 2016 Honda Clarity Fuel Cell
• 2018-2023 Hyundai Nexo
• 2020-2023 Toyota Mirai II
• Hyundai Xcient Fuel Cell

Refer to the vehicle's manufacturer for certification of the vehicle's status as a qualified alternative motor vehicle. The manufacturer should be able to provide a copy of the certification letter from the IRS.

Similarly to electric vehicles, states offer incentives for purchasing alternative motor vehicles. California, for example, may offer a rebate worth up to $4,500.

Find out how to claim tax credits for energy-efficient improvements to your home or other home improvement deductions. In addition, see other tax credits and tax deductions that you may qualify to claim on your tax return. When you prepare and e-file your return on eFile.com, the eFile app will select and enter any deductions and credits you qualify for on your tax return. Claim your EV tax credit n eFile.com; contact eFile.com support if you have further questions or need more help with your taxes.

See also: Can I claim a tax credit for a hybrid or plug-in hybrid?

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