Back in December, we wrote about how the rules for what electric vehicles (EVs) qualify for the federal tax credit were going to change in 2024. Those changes did kick in January 2024, but so did new rules about how to claim the federal tax credit that we hadn’t expected. This blog will go over which vehicles qualify and how to claim the credit. The main kicker: you must purchase from a dealership that has registered with the IRS, whether you claim the credit when you purchase the vehicle or when you file your taxes.

Vehicle Eligibility 

You can review the eligibility requirements for the Clean Vehicle Tax Credit on our website, but here’s a summary: 

• Your income must be under a certain limit
  • $300,000 for joint filers
  • $225,000 for heads of household
  • $150,000 for single filers
• The vehicle must be assembled in North America; have a Manufactured Suggested Retail Price (MSRP) under $80,000 if an SUV or pickup or under $55,000 if a sedan or hatchback; and meet complicated battery and mineral requirements

• Your income must be under a certain limit
  • $150,000 for joint filers
  • $112,000 for heads of household
  • $75,000 for single filers
• The vehicle’s price must be under $25,000
• You must purchase from a dealership and the used vehicle tax credit is only available once per vehicle 

For new vehicles, these rules have resulted in only a handful of vehicle models qualifying for the full $7,500 or $3,750 in 2024: the Chevrolet Bolt EV and Bolt EUV; the Chrysler Pacifica; Ford Escape Plug-in Hybrid and F-150 Lightning; Jeep Grand Cherokee Plug-in Hybrid and Wrangler 4xe; Lincoln Corsair Grand Touring; Rivian R1S and R1T; Tesla Model 3, X, and Y; and the Volkswagen ID.4. This list may expand over the year as more manufacturers submit the necessary paperwork and/or shift their supply chains.

However, and this is very important, not every version of these vehicles will qualify! Which brings us to... 

You Must Purchase from A Registered Dealership 

Starting in 2024, you must purchase your new or used EV from a dealership that has registered with the IRS to qualify for the federal tax credit, regardless of whether you take the tax credit at the point of sale or when you file your taxes.  

The IRS created a tool, called the “Energy Credits Online” portal, which allows dealerships to look up any particular vehicle by its Vehicle Identification Number (VIN) and determine its eligibility for the federal tax credit. It also allows dealerships to claim the federal tax credit on your behalf so that you can receive the incentive at the point of sale. When you purchase a vehicle, the dealership must submit a time-of-sale report containing buyer and vehicle information to the Energy Credits Online portal. Without this submission, you cannot claim a tax credit at either point of sale or through your tax return. 

How do you figure out which dealerships have registered with Energy Credits Online? Unfortunately, right now, you must directly ask the dealership, as the IRS has not published a list. We have reached out to many people to see if such a list exists: the IRS itself, state government officials, national nonprofits, dealer associations, etc., but no luck. We are working on compiling one ourselves, but hopefully, the IRS will take the feedback we and many other organizations have sent them to publicize a list soon. 

A Point on Point-of-Sale

The fact that the Clean Vehicle Credit is now available at the point-of-sale is a huge win. Not all drivers can afford to pay $3,750 or $7,500 when they purchase a vehicle and then wait up to a year to get reimbursed via a tax credit. Making the incentive available at the point-of-sale opens up the credit – and EV technology – to a lot more people. 

The fact that you can now elect to transfer the tax credit to the dealership at the point of sale has a second impact too; your personal tax liability is no longer a limiting factor. Before 2024, if you purchased a vehicle that qualified for a $7,500 tax credit but didn’t have a tax liability of $7,500, there was no way for you to capture the full value of the credit. So, folks with smaller federal income tax liability (often people with smaller incomes) were unable to really take advantage of this credit. Now, if you transfer the tax credit at the point-of-sale, your tax liability is irrelevant, which means even more people can take advantage of the credit to go electric. (Reminder, your income must still be under the limits listed above; it’s your tax liability that is not relevant if you opt for the point-of-sale credit.) 

How To Claim the Credit 

So, if you would like to take advantage of the new or used EV tax credit, here are the steps you need to follow. 

1. Confirm that your expected income for this tax year is under the required limit.
2. Make sure the dealership or store you’re working with has registered with the IRS’ Energy Credits Online portal (by asking a salesperson or General Manager). 
3. Ask the salesperson you’re working with to confirm via the Energy Credit Online portal that the particular vehicle you’re considering qualifies for the federal tax credit. 
4. When you purchase, make sure to receive a copy of (a) the time-of-sale report the dealer submitted and (b) a copy of the confirmation from the IRS of successful submission. 
5. When it comes to tax season, file Form 8936, even if you don’t normally file your taxes and even if you received the incentive at point-of-sale. 

You can learn more at fueleconomy.gov under “Claiming the Credit.”

A Reminder About Leasing 

If you lease a vehicle, you do not directly claim the federal tax credit. Instead, the leasing agent can claim it under the Commercial Clean Vehicle Tax Credit. In many cases, those leasing agents pass the value of the federal tax credit on to consumers in the form of lower monthly payments. You might see some EV leases being advertised with “$7,500 off!” – that’s likely the federal tax credit. When leasing, these are the key points: 

• More vehicles qualify for the federal tax credit when you lease than when you purchase, because the Commercial Clean Vehicle Tax Credit doesn’t have the same complicated requirements as the Clean Vehicle Credit for individuals; 
• Leasing agents claim the federal tax credit, not consumers, and many (but not all) pass the value of that federal tax credit on; 
• You do not have to lease through a dealership that is registered with the IRS, and you do not need to file any special paperwork with your taxes.

Have questions?  

We're here to help! See our webpage on the federal tax credit and email drivegreen@greenenergyconsumers.org with any questions that you have.