Starting January 2024 people who buy qualified used electric cars from a dealership for less than $25,000 could be eligible for a tax credit of up to $4000. This guide and lookup tool helps you figure out if a car you’re interested in is eligible and if you qualify.

Does your future car qualify for the EV tax credit?
Enter a VIN to find out

How point-of-sale rebates work in 2024

Shoppers may “transfer” their eligible tax credit to a dealership to use as a point-of-sale discount on a qualifying new or used vehicle. This means a purchase rebate or cash-back on eligible used EV purchases, making it easier to afford.

Plus, you can take advantage of the full credit at purchase, regardless of how much tax liability you may have at the end of the year. It's an easy way to max out the credit.

Wait, what's the catch?

In order to take advantage of the federal tax credit, the purchase must go through a dealership that has registered with the IRS. This is true whether you use the credit at the time of sale, or at the end of the year.

You will also have to enter information into the IRS portal, which will be able to automatically accept or reject the transaction.

The IRS website "strongly encourages" both buyers and dealers "to receive confirmation of a successfully submitted seller report before finalizing a sale and placing a vehicle in service. Dealers must provide confirmation of an accepted IRS Energy Credits Online seller report submission to buyers."

During the sale, dealers must certify certain information in the IRS portal, such as:

1. The maximum amount of the credit allowable and any other incentive available for the vehicle
2. The amount provided by the dealer to the taxpayer as part of the credit transfer (30% of the purchase price or up to $4000). This amount must equal the amount of the credit allowable and may be provided in the form of cash or a down payment or partial payment for the purchase of the vehicle 
3. Certification that, no later than the time of sale of the vehicle, the dealer will make the payment to the taxpayer (whether in cash or in the form of a partial payment 15 or down payment for the purchase of such vehicle)

Importantly, the IRS is saying that buyers can rely on the dealership eligibility information when it comes to specific vehicles.

At the point of sale, the buyer will also have to enter certain information into the same IRS portal:

1. Date of the sale
2. Buyer’s tax ID number (e.g. social security number)
3. A photocopy of the a valid, government-issued photo identification document
4. Proof of the buyer's income (specifically, that the modified adjusted gross income, or AGI, did not exceed the modified AGI limitations).
5. Proof that the taxpayer is a “qualified buyer” — see more on that below.

Which used electric cars are eligible for tax credits?

Lots of mid- and longer-range EVs are becoming eligible this year, in addition to the plug-in hybrids and lower-range models from earlier years. If you’re curious if a used EV could work for you, check out this article. Nervous about range restrictions but want a sweet, emissions-free ride? Read this one.

1. Vehicles must be at least two models years old (2022 and earlier).
2. Vehicle must have a battery with at least 7kWh — that’s mostly all plug-ins!
3. Vehicles must be sold by a licensed dealer.
4. Vehicle must be sold for less than $25,000.
5. Vehicle cannot have been resold to an individual after 8/16/2022 - but sales to a company or corporate entity are fine.
6. Vehicle cannot have already been used to claim this credit — use the free eligibility checker below!

Does your future car qualify for the EV tax credit?
Enter a VIN to find out

While EVs must cost less than $25,000 to qualify for the federal tax credit, we’ve also been tracking those with an average price just above the threshold. These are vehicles that may be a great deal if you can find (or negotiate) them under $25,000.

Here are several vehicles that are often eligible for point-of-sale rebates at dealerships with their average price for models under $25K as of 4/1/24.

In addition to the table above, this information may also be helpful for your search. We track used EV prices in our quarterly market report.

• An early model Nissan LEAF (2011 to 2017) is under $15,000 with a range of 60 - 100 miles on full charge. Later model years are increasingly available under $25,000, with the 2020 LEAF being the most popular car in inventory under this price.
• Many earlier model year Tesla Model 3s can be found for under $25K, although often not the performance or long range trims. If you want luxury, you may even be able to snag an older Model S!
• It’s rare to find a 2017 to 2020 Chevy Bolt under $25,000 so if you find one in good shape under that price, grab it if you can. Bolts generally have the cheapest cost per range mile, with an EPA range of 238-259 miles. They are an especially great bargain since every 2021 and earlier car should have had their batteries replaced as part of the recall! 
• 2019 - 2020 Hyundai Ioniqs often fall into this category and have a range of 120-170 miles.
• 2019 or 2020 Hyundai Kona EVs can also be found under the cut off price of $25,000. They get an EPA range of 258 miles.

Which buyers can get a $4000 tax credit?

Used EV buyers can qualify for a tax credit of up to $4,000. If the car is eligible, potential purchasers next need to see if they qualify, which depends on their adjusted gross income and a few other factors.

There are a few requirements for those applying for an EV tax credit:

1. You can only use this credit once every three years, but it’s a new program, so everyone will be eligible January 1, 2023!

2. Income requirements: max adjusted gross income (AGI) of $75,000 for single filer, $150,000 for joint filers, $112,500 for head of household. You can check your AGI by looking at your previous year’s tax returns:

•       Form 1040, Line 38
•       Form 1040A, Line 21
•       Form 1040EZ, Line 4

The IRS recently clarified that you may use the AGI from either the year you’re buying the car or the previous year, whichever is lower. 

3. Is this car purchase for personal, non-commercial use? You cannot plan to resell the car, you cannot be the original owner of the vehicle, and you cannot be claimed as a dependent on anyone else's tax credit. Eligible purchasers will have to fill out Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit when they do their year-end taxes.

4. Dealers must report to you at the time of the sale, and to the IRS by January 15 of the next year:

• Dealer's name and taxpayer ID number
• Buyer's name and taxpayer ID number
• Sale date and sale price
• Maximum credit allowable under IRC 25E
• Vehicle identification number (VIN), unless the vehicle is not assigned one
• Battery capacity

Does your future car qualify for the EV tax credit?
Enter a VIN to find out

History of used EV tax credits in the US

The Inflation Reduction Act became law in August, 2023. There were some significant compromises in terms of both tax reform and support for domestic oil, but climate advocates agree that is an important step forward to curb carbon emissions and help the US meet its Paris accord goals. Estimates say the Act will cut about one billion tons of greenhouse gas emissions over the next ten years. 

One of the tenants of the Inflation Reduction Act is the expansion of earlier  EV tax credits by introducing the first federal tax credit for used EVs. Since the US added EV tax credits in 2010, no direct-to-consumer, federal assistance has been dedicated to used EVs. A tax credit of $7,500 has been available on new EVs since 2010. Now, for EVs under $25,000 bought from a licensed dealer, a tax credit of up to 30 percent of the purchase price (capped at $4,000) is available on many used EVs.

Who wins with EV tax credits?

Every used EV buyer is a winner for sure, but without getting too deep into the nerdy economics of it, the biggest beneficiary of the used EV tax credits may end up being dealerships, at least for the next few years.

In other words, there will be greater incentive to buy, but the market can't quickly ramp up supply in response to a lower effective price compared to the increased demand from buyers as a result of that lower effective price. So the impact on sub-$25,000 used-EV prices of this tax credit may– paradoxically–be an average increase of $4,000.

The buyers aren't worse off, as they will end up paying the same amount as they would have before. But the seller ends up getting more for their EV when they sell.  Eventually, that flows through to a higher residual value for new EV purchases, making them more valuable to buy when new.

This whole equation will likely shift over the course of the ten-year timeframe as used EV supply catches up with demand, but in any case, this policy will be effective in accelerating the EV transition.