What is the electric vehicle tax credit? EV tax credit 2025

What is the electric vehicle (EV) tax credit?

Among other things, the Inflation Reduction Act of 2022 changed the rules for credit for EVs bought in 2023 to 2032 (now expiring September 30, 2025).

The credit is for up to $7,500 if you buy a new, qualified plug-in EV or fuel cell electric vehicle (FCV). And preowned (used) electric car owners may qualify for up to $4,000 in a tax break. We will go into more detail on what qualifies below.

Who qualifies for the EV tax credit?

The credit is available to individuals and their businesses. To qualify, you must:

• Buy an EV for your own use, not for resale.
• Use it primarily in the U.S.

In addition, your modified adjusted gross income (MAGI) for the new vehicle credit may not exceed:

• $300,000 for married couples filing jointly,
• $225,000 for heads of households, or
• $150,000 for all other filers.

You can use your MAGI from the year you take delivery of the vehicle, or the year before, whichever is less. If your MAGI is below the threshold in one of the two years, you can claim the credit.

The credit is nonrefundable, so you can't get back more of the credit than your tax. You also can't apply any excess unused credit to future tax years.

EV tax credit 2025

The amount of the credit depends on when you placed the vehicle in service, or “took delivery,” regardless of purchase date.

For new vehicles placed in service April 18, 2023, and after:

• Electric cars will have to meet all of the criteria listed above, plus meet new critical mineral and battery component requirements, for a credit of up to:
  • $3,750 if the vehicle meets the critical minerals requirement only,
  • $3,750 if the vehicle meets the battery components requirement only, or
  • $7,500 if the vehicle meets both.

If the vehicle doesn’t meet these requirements, you won’t get this credit.

How is the EV tax credit calculated?

In general, the minimum credit will be $3,750, the credit amount for a vehicle with the minimum 7-kilowatt hours of battery capacity.

To qualify, a vehicle must:

• Have a battery capacity of at least 7 kilowatt hours.
• Have a gross vehicle weight rating of less than 14,000 pounds (about 6,350.29 kg).
• Be made by a qualified manufacturer.
• Fuel Cell Vehicles do not need to be made by a qualified manufacturer to be eligible.
• Undergo final assembly in North America.
• Meet critical mineral and battery component requirements, as of April 18, 2023.

The purchase qualifies only if:

• You buy the vehicle new.
• The seller reports required information to you at the time of sale and to the IRS.
• Sellers are required to report your name and taxpayer identification number to the IRS for you to be eligible to claim the credit.
• In addition, the vehicle's manufacturer suggested retail price (MSRP) can't exceed:
• $80,000 for vans, sport utility vehicles and pickup trucks, and
• $55,000 for other vehicles.
• MSRP is the retail price of the automobile suggested by the manufacturer, including manufacturer installed options, accessories, and trim, but excluding destination fees. It isn't necessarily the price you pay.

Purchases made before 2023 may qualify for a previous vehicle credit.

Preowned (Used) Electric Vehicles

It’s important to note that as of January 1, 2023, if you bought or buy a qualified used EV or FCV from a licensed dealer for $25,000 or less, you may be eligible for a used clean vehicle tax credit (also referred to as a previously owned clean vehicle credit). The credit equals 30% of the sale price up to a maximum credit of $4,000. This used EV tax credit can only be claimed once every three years.

These credits are nonrefundable, so you can't get back more of the credit than the amount of your taxes. You can't apply any excess credit to future tax years.

How to claim the used EV tax credit

It’s important to note that as of January 1, 2023, if you bought or buy a qualified used EV or FCV from a licensed dealer for $25,000 or less, you may be eligible for a used clean vehicle tax credit (also referred to as a previously owned clean vehicle credit). The credit equals 30% of the sale price up to a maximum credit of $4,000. This used EV car tax credit can only be claimed once every three years.

Taxpayers’ AGI must be below certain amounts to be eligible for the used EV credit:

• Married Filing Jointly (MFJ): $150,000
• Head of Household (HOH): $112,500
• Single, Married Filing Separately (MFS): $75,000
• Qualifying Surviving Spouse (QSS): $150,000

These credits are nonrefundable, so you can't get back more of the credit than your tax amount. You can't apply any excess credit to future tax years.

Preowned vehicle purchases made before 2023 don't qualify.

How to claim EV tax credit 

Starting in 2024, taxpayers have the option to assign the credit to the dealer as a reduction of the vehicle cost. To claim the credit, file Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles) with your tax return.

You will need certain details about your car to claim this credit. You can find your vehicle's weight, battery capacity, final assembly location (listed as “final assembly point”), and VIN on the vehicle's window sticker. You can always work with your Jackson Hewitt Tax Professional on further criteria for this credit.

Even if you do not own an electric car just yet, you may want to hurry as the clean vehicle credits expire for purchases beyond September 30, 2025.

Understanding and getting ahead of tax rules around the EV market could help your family save. Contact a local Jackson Hewitt Tax Pro to find out more about how you qualify or may qualify in the future.

About the Author

Jo Willetts, Director of Tax Resources at Jackson Hewitt, has more than 35 years of experience in the tax industry. As an Enrolled Agent, Jo has attained the highest level of certification for a tax professional. She began her career at Jackson Hewitt as a Tax Pro, working her way up to General Manager of a franchise store. In her current role, Jo provides expert knowledge company-wide to ensure that tax information distributed through all Jackson Hewitt channels is current and accurate.

Jackson Hewitt Editorial Policy