How to Use the EV Clean Tax Credit
Photo: Molly (me) that purchased her clean vehicle with this credit in December 2021. Note: The Prius Prime is no longer on the accepted car vehicle list (though it is on the used car list)!
As a teenager, I was so excited to earn my driver’s license. Being able to drive meant that I could be free and independent. I could take my friends to the movies or pick up food at my favorite restaurant whenever I wanted. I even drove across the country without telling my parents to visit a boyfriend attending school hundreds of miles away (sorry Mom!) I had power and it was thrilling! Now, we have the power to do something else with our cars. We can decrease our personal carbon footprint, and therefore the country’s, by choosing to drive an electric vehicle.
Nearly 60 percent of the carbon dioxide emissions in the United States are from passenger cars, S.U.V.s, and pickup trucks, but this can change (NY Times). Just imagine… if you get an electric vehicle, it inspires your friends and their friends to do so too. It is a chain reaction for environmental action! At this moment in time, approximately 91.5% of U.S. households have at least one vehicle available, but fewer than 1% of the vehicles on the road are electric (Motley Fool, NY Times). YOU can help bring up this percentage!
The U.S. government is even incentivizing us to make the move to electric with the clean vehicle tax credit. For new cars, you can get up to $7,500, and for used cars, you can get up to $4,000. However, the Clean Vehicle Tax Credit can be hard to understand, which discourages people from using it. To break it down, I’ve outlined the process I took when I purchased my clean(er) vehicle in 2021 with this credit (and added in the newest updates from the inflation reduction act).
#1 Check the EV Tax Credit Qualifications
You can check this on the IRS website, but it’s also broken out below!
A.) Make sure that YOU qualify for the credit
To purchase a NEW car you, must:
Buy it for your own use, not for resale
Use it primarily in the U.S.
Not make too much money. At the time of this blog post, your modified adjusted gross income (AGI) may not exceed:
$300,000 for married couples filing jointly
$225,000 for heads of households
$150,000 for all other filers
To purchase a USED car, you must:
Be an individual who bought the vehicle for use and not for resale
Not be the original owner
Not be claimed as a dependent on another person’s tax return
Not have claimed another used clean vehicle credit in the 3 years before the purchase date
Not make too much money. Your modified adjusted gross income (AGI) may not exceed:
$150,000 for married filing jointly or a surviving spouse
$112,500 for heads of households
$75,000 for all other filers
B.) Make sure the CAR that you want qualifies for the credit
There are multiple criteria for new and used cars to qualify and this impacts the credit amount you can receive. For new cars, you can get up to $7,500, and for used cars, you can get up to $4,000. These criteria will continue to change over the next few years, so it’s easiest to…Check this list for the NEW cars that qualify
Check this list for the USED cars that qualify and check with the dealership, because if a previous owner has gotten a tax credit on the vehicle before, another one can’t be used. A vehicle can only get a tax credit once in its lifetime.
C.) Make Sure the DEALERSHIP is registered with the IRS Energy Credits Online (Not all car dealerships are)
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#2 Check for Other Credits and Incentives
The clean vehicle tax credit is an offering from the federal government, but many state governments offer tax incentives too. Check this website for other offerings in your area and don’t make the mistake I made! I live in New York but purchased a car in Arkansas (where I grew up) because new cars were really hard to come by in 2021. Because I purchased a car in a different state, I was not allowed to claim the NY state tax rebate since you had to claim this state rebate through the dealer. Rookie mistake!
#3 Research More About the Car!
There are so many things to consider when picking a car, including, but not limited to car size, purchase cost, maintenance costs, carbon emissions, and potential resale value. Bulleted below are some of the websites that helped me learn about all these variables and ultimately choose the car right for me.
Total Range. To learn how far the cars would go on a charge, I looked at this department of energy website.
Greenhouse gas emissions. To help learn about the emissions emitted by different types of vehicles, I used this interactive graph on carboncounter.com that compares the greenhouse gas emissions and costs of cars. It’s a couple of years old now, but still helpful to get an overall picture of the types of vehicles out there!
General EV information. Owning an EV still seems a bit scary, but I learned a lot from this website that helps explain that “it’s normal now.”
#4 Go to the Dealership to test out the car!
And triple check that the DEALERSHIP is registered with the IRS Energy Credits Online
#5 Buy the car! But first…
Make sure the dealer checks the vehicle eligibility in the IRS portal because…
not all new EVs qualify (depending on where their parts are made or are sourced from).
not all used EVs can get the credit. As mentioned above, if a previous owner has gotten a tax credit on the vehicle before, another one can’t be used. A vehicle can only get a tax credit once in its lifetime.
Have the dealer check for other discounts like those found here
Get everything in writing
The dealer will provide the price and discounts.
You will sign an affidavit stating you don’t make too much money to receive the discount.
You will sign over your tax credit to the dealer.
*YOU MUST MAKE SURE YOU GET A COPY OF THE SUCCESSFULLY SUBMITTED SELLER REPORT*
(you’ll file this with your taxes)Receive your tax credit AT THE TIME OF PURCHASE.
Purchase the car!
Have fun!
#6 File the seller report with your taxes for the year that you purchased the car
Before 2024, you were not able to claim the credit through the dealership, which made it much more complicated. Now, you receive the credit on-site and save the seller report to file with your taxes. There is less work required on your part and less money needed to put down upfront on your car. You know exactly what you’re getting.
#7 - Use Your Car!
Go have fun in your new EV! To make it even more sustainable, try searching for charging stations that source their energy from sustainable sources, like wind and solar!
Keep checking the IRS website for the latest information on the qualifications for you and your car.