The popularity of electric vehicles (EVs) has exploded in recent years. As more automakers expand their EV offerings and ranges improve, these zero-emission cars, SUVs and trucks have proven they can meet the needs of mainstream buyers. The environmental and energy security benefits of EVs are also becoming increasingly apparent. However, the often higher upfront cost of EVs compared to similar gas-powered models remains a barrier for many potential buyers.
That’s why the revival and expansion of the federal EV tax credit set to take effect in 2024 is such a big deal. With a maximum credit of $7,500, the program provides substantial savings to make EVs more accessible. This incentive will accelerate EV adoption, reduce carbon emissions, create green jobs and further establish US leadership in clean transportation.
Who Benefits From the New EV Tax Credit?
The enhanced federal EV tax credit signed into law in 2023 will be available to many American buyers purchasing an eligible new electric car, SUV or truck starting January 1, 2024. Both individuals and businesses can benefit.
Specific requirements include:
- Eligible vehicles: New all-electric and plug-in hybrid vehicles below certain price thresholds and meeting battery size minimums qualify. Used EVs do not receive the credit.
- Income caps: Individual filers with adjusted gross incomes up to $150,000 and joint filers up to $300,000 can claim the full credit. It begins phasing out above those amounts.
- Purchase timing: The vehicle must be acquired in 2024 or later to receive the credit.
- Personal use: The EV must be titled and registered to the taxpayer claiming the credit. Vehicles purchased for resale do not qualify.
By expanding eligibility and making the credit more generous, the new program will further incentivize EV purchases and make sustainable transportation more affordable.
The Economic and Environmental Upsides
Increasing EV adoption through the tax credit provides widespread benefits for the economy, environment and energy security.
- Jobs: The EV industry supports hundreds of thousands of domestic manufacturing and supply chain jobs. More EVs on the road will lead to more jobs.
- Cleaner air: EVs produce no tailpipe emissions, improving air quality especially in urban areas and helping fight climate change.
- Energy independence: EVs reduce reliance on imported fossil fuels like oil. That improves the trade deficit and national security.
The new tax credit will ensure more Americans enjoy these and other benefits by removing some of the cost premium for EVs compared to gas-powered models.
Breakdown of the New Tax Credit
The revived and enhanced federal tax credit provides substantial savings up to $7,500 on a new EV purchase starting in 2024. But the actual value depends on the vehicle type, price and buyer’s tax liability. Here is an in-depth look at how the new credit works.
Eligibility Criteria
Not all EVs on the market qualify for the full $7,500 tax credit. Eligibility depends primarily on:
- Battery capacity: To qualify for the full credit, a new electric car, SUV or truck must have a battery capacity of at least 7 kilowatt-hours (kWh) per vehicle. Plug-in hybrids need at least 4kWh.
- MSRP thresholds: The credit phases out for individual vehicle models once an automaker sells 200,000 qualifying EVs. Credit amounts are reduced in the following quarter. The MSRP caps prevent this phaseout.
- Final assembly: Only vehicles assembled in North America qualify.
- Date of purchase: The EV must be acquired on or after January 1, 2024.
As long as a new electric car, truck or SUV meets these criteria, and the buyer meets income limits, it will be eligible for the maximum tax credit.
Credit Amount Calculation
The actual value of the tax credit depends on the vehicle type, price and the buyer’s total tax liability:
| Vehicle Type | MSRP Range | Max Credit Amount |
|---|---|---|
| Electric car, SUV, truck | Up to $55,000 | $7,500 |
| Electric car, SUV, truck | $55,000 – $80,000 | $3,750 |
| Plug-in hybrid | Up to $80,000 | $4,000 |
- For electric cars, SUVs and trucks with MSRPs up to $55,000, the maximum credit is $7,500.
- Above $55,000, the credit phases out reaching $3,750 at $80,000.
- For plug-in hybrids, the maximum credit is $4,000 up to an MSRP of $80,000 where it phases out.
- No credit is allowed above the phaseout thresholds.
The credit amount is further limited by the buyer’s total federal tax liability. If you owe less than $7,500 in taxes for the year, your credit is capped at the amount owed. However, any unused credit amount can be carried forward to future tax years.
Claiming the Tax Credit
Buyers claim the EV tax credit when filing their taxes for the year they acquired the vehicle. The steps include:
- Obtain Form 8936 – This form is used to calculate the allowable credit amount based on the vehicle purchase price and eligibility.
- Complete Form 8936 – Fill in all required vehicle and buyer information to compute the maximum credit you qualify for.
- Submit with tax return – Include the completed Form 8936 with your Form 1040 when filing your annual taxes.
- Receive credit or carryforward – The allowable credit will be applied to your tax liability for the year. Any excess can be carried forward up to 20 years.
The IRS provides detailed instructions for properly filling out Form 8936 and claiming the EV tax credit. Taking advantage of this generous savings is straightforward as part of filing your annual taxes.
Maximizing Your Savings
While the new tax credit provides substantial savings toward a new EV purchase, buyers can amplify their savings in several ways:
Compare EV Models
Hundreds of new EV models will qualify for the $7,500 tax credit in 2024. Comparing options in your desired category can identify the vehicles that offer you the maximum tax savings. This table shows some potential savings:
| Make & Model | MSRP | Est. Credit |
|---|---|---|
| Nissan Leaf | $28,000 | $7,500 |
| Ford Mustang Mach E | $45,000 | $7,500 |
| Tesla Model 3 | $47,000 | $7,500 |
| Audi e-tron | $66,000 | $3,750 |
Time Your Purchase
In some cases, you may be able to time an EV purchase to combine the federal tax credit with other incentives. For example, buying in early 2024 could allow you to claim the $7,500 credit on your 2024 taxes, and a state incentive on your 2023 taxes. Such coordination amplifies savings.
Explore Financing Options
Specialized EV financing programs allow buyers to finance the purchase while still benefiting from the tax credit. Options include loans that advance the estimated credit amount at purchase to lower payments. Shop financing offers to maximize savings.
The Road Ahead
While buyers can enjoy savings up to $7,500 starting in 2024, the future of the EV tax credit program remains uncertain. Here is a look at what may be ahead.
- Extension beyond 2024 – Current proposals aim to extend the expanded credit through at least 2030 to provide long-term stability.
- Charging infrastructure – Building out a national public charging system remains critical to widespread EV adoption. Federal investments in charging aim to address this.
- Additional state incentives – Many states offer their own additional EV incentives that buyers can stack on the federal credit for maximum savings.
With transportation being the largest source of carbon emissions, rapidly transitioning to EVs powered by clean electricity is essential to fighting climate change. The return of the $7,500 federal tax credit in 2024 will help accelerate this transition while saving American buyers money on their next green vehicle purchase.
Take advantage of this program to charge ahead with savings and contribute to a more sustainable future!
Conclusion
The revival of the federal electric vehicle tax credit provides substantial savings up to $7,500 for American buyers starting in 2024. By offsetting the often higher upfront cost, this incentive will help accelerate mainstream EV adoption and utilization. Drivers will save money while supporting domestic jobs, improving air quality and reducing dependence on fossil fuels.
With many automakers expanding EV model availability in coming years, there has never been a better time go electric. Tap into the maximum EV tax credit when making your next vehicle purchase. Then enjoy exhilarating performance and cutting edge technology while driving emissions free. You’ll save money while driving the sustainable future of transportation forward.
