What’s eligible, what you need to file, and more.
You may have heard about the electric vehicle tax credit and could be wondering how this could apply to you as you shop for a used car. Read on to find out more about how to claim the EV tax credit for a used vehicle.
What is an EV tax credit?
The federal clean vehicle tax credit (also known as an electric vehicle (EV) tax credit) is a nonrefundable credit for qualified taxpayers who buy an eligible electric or plug-in hybrid vehicle. For used vehicles, you can get 30% of the vehicle price in a tax credit (up to a maximum of $4000).
It’s worth pointing out that this isn’t a tax write-off, which is a tax deduction. This is a tax credit. This means the $4000 maximum credit on a used vehicle (or $7500 on a new vehicle) reduces your tax bill by that much.
To qualify for the federal used EV tax credit, both the car and the buyer must meet certain qualifications. These requirements are set by the federal government under the Inflation Reduction Act. This article provides general information on eligibility below, but be sure to speak to a tax expert if you have questions and to verify your unique circumstances.
Which used EVs qualify for tax credits?
The used vehicles that qualify for a federal EV tax credit include certain vehicles from Ford, Hyundai, Kia, Nissan, Tesla, and many more. (View the full list at fueleconomy.gov.) So, whether you’re looking to save on a city compact car like the Chevrolet Spark EV or need a small SUV like the Chevrolet Bolt EV you’ll be able to find the vehicle that suits you.
To qualify for a used EV tax credit, the vehicle must meet certain qualifications, including but not limited to:
Have a sale price of $25,000 or less, which includes all dealer-imposed costs or fees not required by law
Be a model year at least two years earlier than the calendar year when you buy it. (For example, a vehicle purchased in 2023 must be a model year of 2021 or older.)
Have a gross vehicle weight rating (GVWR) of less than 14,000 lbs
Be an eligible battery-electric or plug-in hybrid vehicle with a battery capacity of at least 7 kilowatt hours. Check fueleconomy.gov for qualifying makes and models.
Be purchased for use in the United States
Be purchased from a licensed dealer
Not have already been transferred after August 16, 2022, to a qualified buyer
It’s worth noting that the rules for new EVs are slightly different, so if you are looking for a new EV, be sure to read about those too. For more information on which vehicles are eligible for the credit, visit fueleconomy.gov.
Who qualifies for a used EV tax credit?
To be eligible for the federal used EV tax credit, your modified adjusted gross income must not exceed:
$150,000 for joint returns (or surviving spouse);
$112,000 for heads of households; and
$75,000 for other individuals
You also need to meet other eligibility requirements, including but not limited to:
You must be the user of the vehicle (meaning not just buying to resell)
You must be an individual and not a business
You can’t be the original owner of the vehicle
You can’t be named as a dependent on anyone else’s tax return
You cannot have claimed another used clean vehicle credit in the last three years
How does the federal used EV tax credit work?
If you’re planning to claim the credit on your tax return, the dealer will provide a report with buyer and vehicle purchase information to both you and the Internal Revenue Service (IRS). You must give the dealer your taxpayer identification number (usually, a social security number) for the dealer to complete this report.
To actually receive the credit, you need to file Form 8936 with the IRS with your annual taxes. If you don't file this form, you won't get the tax credit.
Can you use the federal used EV tax credit as a down payment?
As of January 1, 2024, some dealers may accept a transfer of a buyer’s allowable EV tax credit as a down payment on an eligible vehicle (also known as a “point of sale transfer of credit”).
To qualify for this option, you need to provide your tax ID number to the car dealer. You’ll also be asked to attest to certain statements, including that you meet the taxpayer eligibility requirements like the annual gross income limits. Once you do this, you’ll be able to transfer the full amount of your tax credit to the dealer to use as a down payment on your vehicle. You must still file a Form 8936 with the IRS when you file your taxes for the year.
Please note that CarMax is not currently offering the option to transfer an EV tax credit as a down payment.
Does CarMax sell vehicles eligible for a used EV tax credit?
Yes! CarMax has a diverse selection of used electric and hybrid vehicles to help you with making the switch to alternative fuel options. CarMax can help you understand which vehicles may be eligible for a federal EV tax credit and, if you purchase an eligible vehicle, will help provide you and the IRS with documentation so that you can claim the tax credit when you file your taxes.
Is there a hybrid tax credit?
The federal clean vehicle tax credit does not just apply to fully electric vehicles; many plug-in hybrids are also on the IRS’s list at fueleconomy.gov. So, if you're looking for a hybrid, there are plenty of hybrid models that may qualify, like a Mitsubishi Outlander PHEV or a Hyundai Sonata Plug-in Hybrid.
Researching and shopping for a used electric or hybrid vehicle can be a fun next step into different transportation options. And if you qualify for an EV tax credit, it's worth looking at your options, no matter whether you're looking for a new or used vehicle.
Jess is an automotive journalist dedicated to demystifying electric vehicles. She can be found tweeting as @jetlbomb on everything from unusual classic cars to electric road trips.
