2024 EV Tax Credit: The Best Way to Save on Your EV

Content Table

Introduction

What is the electric vehicle tax credit?

Which cars qualify for a federal EV tax credit?

How to qualify for the 2024 EV tax credit?

Used EV tax credit qualifications

State and Local Incentives

Websites to Follow up the Latest Information

Tips for Maximizing Your EV Tax Credit

Content

If you're looking to buy an electric car this year, you may be able to save some money up front or later in the purchase.

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. This means you can reduce the purchase price of your new EV immediately, rather than waiting for tax season.

However, with the restructuring of the electric vehicle tax credit, the eligibility criteria become tighter: fewer cars are qualifying for the credit in 2024 than before.

This blog will delve into the specifics of how these credits work, what you need to do to qualify, and how to navigate the process with your dealer. Whether you're a first-time EV buyer or looking to upgrade, this information is crucial for making an informed decision in 2024.

 

What is the electric vehicle tax credit?

The electric vehicle tax credit, or the EV credit, is a nonrefundable tax credit available to taxpayers who purchase qualifying electric vehicles or plug-in hybrid vehicles (PHEV). The nonrefundable tax credits reduce your tax liability based on the amount of the corresponding credit, but do not refund any excess credit amount.

In 2024, there is another option for taxpayers: they can choose to transfer the tax credit to an eligible dealer instead of claiming it on the tax returns of the following year. This allows the dealer to reduce the cost of the vehicle by the corresponding credit amount, resulting in an immediate point-of-sale discount.

To qualify for either option, your income must be below certain thresholds, and the vehicle you plan to purchase must also meet a number of IRS regulations, including price caps and manufacturing guidelines.

 

Which cars qualify for a federal EV tax credit?

As of August 2024, the following fully electric and plug-in hybrid vehicles may be eligible for a full or partial tax credit if delivered on or after Jan. 1, 2024.

Car Make and Model	Tax Credit Amount	MSRP Limit
Acura
ZDX (2024)	$7,500.	$80,000.
Audi
Q5 PHEV 55 TFSI e quattro (2023-2024) Q5 S Line 55 TFSI e quattro (2023-2024)	$3,750.	$80,000.
Cadillac
LYRIQ (2024)	$7,500.	$80,000.
Chevrolet
Blazer (2024)	$7,500.	$80,000.
Bolt (2022-2023) Bolt EUV (2022-2023)	$7,500.	$55,000.
Equinox (2024)	$7,500.	$80,000.
Chrysler
Pacifica PHEV (2022-2024)	$7,500.	$80,000.
Ford
Escape (2022-2024)	$3,750.	$80,000.
F-150 Lightning: Standard, Extended Range Battery (2022-2024)	$7,500.	$80,000.
Honda
Prologue (2024)	$7,500.	$80,000.
Jeep
Grand Cherokee PHEV 4xe (2022-2024)	$3,750.	$80,000.
Wrangler PHEV 4xe (2022-2024)	$3,750.	$80,000.
Lincoln
Corsair Grand Touring (2022-2024)	$3,750.	$80,000.
Nissan
Leaf S (2024) Leaf SV Plus (2024)	$3,750.	$55,000.
Rivian
R1S Dual Large (2023-2024) R1S Dual Standard, Standard+ (2024) R1S Performance Dual Standard+ (2024) R1S Quad Large (2022-2024)   R1T Dual Large (2023-2025) R1T Dual Max (2023-2024) R1T Dual Performance Large (2023) R1T Dual Standard, Standard+ (2024) R1T Performance Dual Standard+ (2024) R1T Quad Large (2022-2024)	$3,750.	$80,000.
Tesla
Model 3 Long Range AWD (2024)	$7,500.	$55,000.
Model 3 Long Range RWD (2024)	$7,500.	$55,000.
Model 3 Performance (2023-2024)	$7,500.	$55,000.
Model X AWD (2023-2024)	$7,500.	$80,000.
Model Y AWD (2023-2024) Model Y Long Range RWD (2024) Model Y Performance (2023-2024) Model Y RWD (2024)	$7,500.	$80,000.
Volkswagen
ID.4 AWD Pro ID.4 AWD Pro S ID.4 AWD Pro S Plus   ID.4 Pro ID.4 Pro S ID.4 Pro S Plus   ID.4 S ID.4 Standard   (2023-2024)	$7,500.	$80,000.

There are some EVs lose their tax credit for 2024:

• The Rear Wheel Drive and Long Range versions of the Tesla Model 3 will no longer qualify for a $7,500 tax credit.
• The Ford Mustang Mach-E and E-Transit van and the Lincoln Aviator Grand Touring plug-in hybrid (PHEV) will no longer qualify.

 

 

 

Chevrolet Blazer models manufactured in 2024 may qualify for full tax credit

Photo: Chevrolet

How to qualify for the 2024 EV tax credit?

Price Cap

Vans, SUVs, and pickup trucks must have an MSRP, or Manufacturer's Suggested Retail Price of $80,000 or less to qualify. The cap is $55,000 for other vehicles such as sedans and passenger cars. For used vehicles, the price cap drops to $25,000.

For new vehicles, the MSRP, as defined by the IRS, is the base retail price provided by the manufacturer, plus the retail price of each accessory or optional equipment which is physically present on the vehicle at the time of delivery to the dealer. When claiming the credit, the MSRP excludes taxes and other fees added by the dealer.

Income Limits

In addition to the vehicle price cap, the EV tax credit sets a limit on the modified adjusted gross income that a taxpayer can earn to qualify.

New EVs

• Single and married filing separately: $150,000.
• Head of household: $225,000.
• Married filing jointly: $300,000.

 

Used EVs

• Single and married filing separately: $75,000.
• Head of household: $112,500.
• Married filing jointly: $150,000.

Final Assembly Requirements

Vehicles must have had final assembly in North America to qualify for the credit.

 

Used EV tax credit qualifications

The purchase of a qualifying used electric vehicle can result in a credit of up to $4,000, limited to 30% of the purchase price. Some other conditions:

• Used car must be plug-in electric or fuel cell with at least 7 kilowatt hours of battery capacity.
• Only qualifies for the first transfer of a vehicle.
• Purchase price of car must be $25,000 or less.
• Car model must be at least two years old.
• Vehicle must weigh less than 14,000 pounds.
• Credit can only be claimed once every three years

 

State and Local Incentives

While focusing on EV credits, it's also important to know about other incentives on the state and local levels. Under certain circumstances, the state and local incentives could be stacked with the federal ones. However, some states may not allow you to “double-dip” or claim a state-level rebate on top of a federal one. Please make sure you’re aware of any restrictions that come with applying for multiple incentives. Here are some of the most EV-friendly states that offer incentives.

• California

1. Driving Clean Assistance Program(DCAP): DCAP is a financial education and down payment assistance program for clean energy vehicles offered to low-income families/individuals. There are two services: a grant of up to $7,500 (amount depends on income level and the vehicle type) and financing of up to $30,000. An applicant may apply for just one service or both.
2. Used Electric Vehicle Rebate Program: Rebates of up to $1,500now available for qualifying used electric vehicles (EVs) purchased within 12 months of application submittal. The Program now offers up to an additional $2,500 rebate for applicants who reside in a home that is participating in the Lifeline or EZ-SAVE Low Income Customer Assistance programs, for a total rebate amount of up to $4,000 (not to exceed the applicant’s total net cost)..
3. California Vehicle Retirement Consumer Assistance Program(CVRCAP): CVRCAP offers eligible consumers an incentive to retire their operational vehicle. Consumers meeting the income eligibility requirement may receive $1,500 for each vehicle retired. All other vehicle owners may receive $1,000 to retire their vehicle at a BAR-contracted dismantler.
4. Replace Your Ride: Replace your older, high-polluting vehicle with a newer plug-in Hybrid, electric or fuel cell (hydrogen) vehicle. You also have the option of replacing your old vehicle with an e-bike or car-sharing or public transit passes. You could be eligible to receive upto $12,000 if you replace your ride. The program is limited to vehicle owners residing in the jurisdiction of the South Coast Management District who meet the income and vehicle requirements.
5. Clean Air Vehicle Decal Program: Some vehicles that meet certain emissions standards may be eligible for a CAV decal and identification card. These allow use of High Occupancy Vehicle (HOV, or carpool) lanes.

 

• New York

1. Drive Clean Rebate: The Drive Clean Rebate offers electric vehicle buyers up to $2,000 off the purchase or lease of 60+ new EV models. Taking advantage of the Drive Clean Rebate is very easy: simply purchase a qualifying electric car from a participating dealer, and a discount of up to $2,000 will be applied when you pay.

• Washington

1. Alternative Fuel Vehicle (AFV) Retail Sales and Use Tax Exemption: The exemption is applied to the sales price or fair market value when you purchase or lease a passenger car, light duty truck, or medium duty passenger vehicle that is powered exclusively by a clean alternative fuel or capable of traveling at least 30 miles using only battery power.
2. Washington EV Instant Rebates: Eligible drivers can get up to $9,000 in Instant Rebates on the lease or $5,000on the purchase of a new qualifying EV — plus up to $7,500 in federal incentives on certain vehicles.

• Colorado

1. Plug-In Electric Vehicle Tax Credit: Colorado taxpayers are eligible for a state tax credit of $5,000for the purchase or lease of a new EV on or after July 1, 2023 with a manufacturer’s suggested retail price (MSRP) up to $80,000. Lease agreements must have an initial term of at least two years. Beginning January 1, 2024, Coloradans purchasing an EV with an MSRP up to $35,000 will be eligible for an additional $2,500 tax credit.

For tax years commencing on or after January 1, 2024, but prior to January 1, 2026, an additional credit of $600 is allowed if the purchaser or lessee assigns the entire allowable credit to a financing entity or motor vehicle dealer.

2. New EV Rebate- Xcel Energy: Income-qualified customers can receive $3,000 off a used or $5,500 off a new EV when you buy or lease from a Colorado-based car dealer.
3. Vehicle Exchange Colorado (VXC) Program: The Vehicle Exchange Colorado (VXC) program helps income-qualifiedColoradans recycle and replace their old or high-emitting vehicles with electric vehicles (EVs). Eligible Coloradans can receive the rebate amounts up to $6,000 for a new EV or up to $4,000 for a used EV purchase or lease.

• Vermont

1. Drive Electric Vermont State Incentive: This program is for new plug-in electric vehicle purchases or leases with a term of 24 months or longer. Incentive amounts, up to$5,000, vary by income level and whether the vehicle is an all-electric or plug-in hybrid model.
2. MileageSmart Used EV Incentive: The updated MileageSmart incentive offers 25% of the vehicle's initial price, capped at $2,500, for used EVs and Plug-In Hybrid Vehicles (PHEVs).
3. Replace Your Ride (RYR) Program: The State of Vermont is offering a limited-time incentive program to consumers for the scrapping of their old Internal Combustion Engine (ICE) vehicle. The incentive amount for scrapping an eligible ICE vehicle is either $2,500 or $5,000, depending on the applicant’s income.

• Maryland

1. Electric Vehicle and Fuel Cell Electric Vehicle Tax Credit: You may be eligible for a one-time excise tax credit, up to $3,000, when you purchase a qualifying zero-emission plug-in electric or fuel cell electric vehicle.

• New Jersey

1. Charge Up New Jersey Incentive: New Jersey residents can receive a $2,000 EV incentive and a $250 EV charger incentive. Beginning in fall 2024, income-qualifying residents can receive an additional $2,000 through the Charge Up+ incentive.

• Massachusetts

1. MOR-EV Program: $3,500 rebates are available for new or used cars. Income-qualifying drivers can receive an additional rebate of $1,500. $1,000 additional rebate for trading-in a qualifying vehicle.

• Connecticut

1. CHEAPR New EV Rebate: CHEAPR Standard incentives of up to $7,500 are available to Connecticut residents who purchase or lease a new eligible vehicle from a licensed Connecticut new automobile dealer or original equipment manufacturer

• Delaware

1. Delaware Clean Vehicle Rebate Program: Delaware residents could receive a rebate of up to $2,500 with a purchase or lease of a new or used electric vehicle.

 

Helpful Websites

1. https://fueleconomy.gov/feg/tax2023.shtml

You can use the tools on this website for the most up-to-date information on eligible models. You can filter by purchase situation, model year and vehicle type and determine which vehicle qualifies based on its delivery date.

2. https://www.electricforall.org/rebates-incentives/

In this website, you can enter a ZIP code to view the incentives available in your area. You can filter by income requirement and used car eligible to narrow your search. This website also makes it easy to visit the official websites of different incentive programs.

 

The Bottom Line

As we navigate through 2024, the landscape of electric vehicle (EV) tax credits is both dynamic and promising. The journey towards electrification is exciting and full of opportunities, and with the right knowledge, you can be at the forefront of this transformative era in transportation.

 

Thank you for following along, and stay tuned for more updates on how you can drive towards a cleaner, greener future!