Why the $7,500 electric vehicle tax credit may be easier — and harder — to get in 2024 (2024)

FAQs

Why the $7,500 electric vehicle tax credit may be easier — and harder — to get in 2024? ›

New rules for 2024 will allow buyers to get the EV tax credit at the point of sale, rather than waiting for tax season. Unlike current rules, consumers won't need to have a tax liability to get it. However, fewer new EVs will likely qualify for a tax break starting Jan. 1 due to car manufacturing requirements.

People who buy new electric vehicles may be eligible for a tax credit of up to $7,500, and used electric car buyers may qualify for up to $4,000. New in 2024, consumers can also opt to transfer the credit to an eligible dealer instead for an immediate discount on the vehicle at the point of sale.

Not all consumers qualify for a tax break, either. The EV tax credit carries some eligibility requirements for consumers. Household income must fall below certain thresholds, for example. The requirements vary for new and used EV purchases.

“Automakers already are significantly reorienting their supply chains.” Under the final rule, EVs will no longer qualify for the federal tax credit if they contain battery components that were manufactured or assembled by a Chinese firm.

The earned income credit is a refundable tax credit for low- to middle-income workers. For tax returns filed in 2024, the tax credit ranges from $600 to $7,430, depending on tax filing status, income and number of children. Taxpayers without children can qualify for a lower credit amount.

For single taxpayers and married individuals filing separately, the standard deduction rises to $14,600 for 2024, an increase of $750 from 2023; and for heads of households, the standard deduction will be $21,900 for tax year 2024, an increase of $1,100 from the amount for tax year 2023.

Vehicles meeting both the critical mineral and the battery component requirements are eligible for a total tax credit of $7,500. Vans, sport utility vehicles, and pickup trucks must not have an MSRP above $80,000, and all other vehicles may not have an MSRP above $55,000.

No, you cannot claim federal tax credits for more than 1 EV per filer in a single tax year. The vehicle can only be claimed twice in its lifetime—once when it is purchased new (up to $7,500 in credit) and once when it is sold as used by a dealer (up to $4,000 in credit).

If you don't owe any money on your income taxes, the only way to take advantage of the federal EV tax credit on a car is to transfer it to the dealership you're buying from. It then can be applied as a discount on the purchase.

More than $1 billion in EV tax credits issued upfront to buyers, Treasury and IRS say. The federal government has issued more than $1 billion in tax credits for new and used electric vehicles as an upfront cash incentive to car buyers, the Treasury Department and IRS said. The advance payments kicked in Jan. 1, 2024.

Is EV tax credit worth it? ›

Key takeaways. The electric vehicle (EV) tax credit is designed to make electric and plug-in hybrid vehicles more affordable to US consumers. The credit is worth up to $7,500 for new vehicles and $4,000 for used vehicles.

A vehicle's MSRP must not exceed certain limits, so pricey EVs, such as the GMC Hummer EV, Lucid Air, and Tesla Model S, won't qualify. For SUVs, pickup trucks, and vans, the threshold is $80,000. For sedans, hatchbacks, wagons, and other vehicles, the credit cuts off at $55,000.

The used EV tax credit will only apply once in the vehicle's lifetime. Subsequent owners will not be eligible. Once a buyer has taken the federal used EV credit, they are not eligible for another credit for three years. The vehicle must be for personal use and "not for resale."

To qualify for the EITC, you must: Have worked and earned income under $63,398. Have investment income below $11,000 in the tax year 2023. Have a valid Social Security number by the due date of your 2023 return (including extensions)

The 2024 to 2025 tax credits notices may show predicted payments for the tax year 2025 to 2026 - these are automatically generated and should be disregarded. Tax credits are ending on 5 April 2025 and are being replaced by Universal Credit.

Why is my tax refund smaller this year? Congress expanded the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC) for 2021 only to provide continued relief due to the COVID-19 pandemic. Since this expansion has ended, your tax refund may be less than the year before.

If you don't owe any money on your income taxes, the only way to take advantage of the federal EV tax credit on a car is to transfer it to the dealership you're buying from. It then can be applied as a discount on the purchase.

The tax credit can only be used to reduce the amount of tax you owe. It does not act as a rebate (until 2024). For example, if you end up owing $4,000 on your taxes and you have a $7,500 CVC, the CVC will wipe out your $4,000 tax bill, but you will not receive the $3,500 difference as a refund.

The used EV tax credit will only apply once in the vehicle's lifetime. Subsequent owners will not be eligible. Once a buyer has taken the federal used EV credit, they are not eligible for another credit for three years. The vehicle must be for personal use and "not for resale."

As long as your tax liability for the year was at least 7.5k, you'll get the full amount. Either in reduction of what you owe or adding to your tax return. If you owe $8k you'll owe them $500 (assuming your tax liability was at least 7.5k). Tax credits (generally) roll forward, too.