How To Qualify for the $4000 Used EV Tax Credit

It’s easy being green, especially when you get a tax credit for it.

The time has come for you to buy a new vehicle, at least one that is “new” to you. After browsing local car dealership websites and doing online diligence at KBB or Cars.com, you discover that the price of a new vehicle in 2024 just does not fit in your budget, and with the cost of fuel in today’s market, you are actually considering an electric vehicle to further enhance your savings, and maybe even feel a little better about yourself since you are contributing to bettering the environment.

You have heard about the Federal EV Tax Credit incentive, and after a quick google search, you find that New Electric Vehicles may be eligible for a tax credit of up to $7,500, and Used EV’s can qualify for a tax credit of up to $4,000 or 30% of the sales price (whichever is less).Great news!

Even better news is that starting in 2024, the used tax credit can actually be applied at the time of the actual purchase of your vehicle. The credit is applied as a rebate off the sticker price, which can provide instant savings. Now we are cooking right? Well, maybe.

There are a number of limitations and guidelines that not only you the purchaser and taxpayer must qualify for, but that the vehicle must meet in order to qualify for the Used EV Tax Credit.. These guidelines are broken down at FuelEconomy.gov and IRS.gov. Here, we’ve summed everything up for you to save you some time.

Used EV Tax Credit Qualifications

To start, make sure you qualify as a taxpayer and/or car buyer. As a Taxpayer, you must be an individual who is not a dependent that is claimed on another taxpayer’s tax return and must be buying the vehicle for use and not resale. In other words, if you are 20 year old living at home and your parents still claim you as a dependent, sorry, no credit for you!

However, assuming you are self-sufficient and living on your own, you also must not have claimed this credit in the 3-year period prior to the sale of the qualifying vehicle, which shouldn’t be a problem for most.. Now let’s make sure you don’t earn too much money, because there are also income limitations.

Taxpayer Status and Income Eligibility

The taxpayer’s modified adjusted gross income (MAGI) for either the current year or the prior year must be:

• $150,000 or less for joint filers and surviving spouses.
  $112,500 or less for head of household filers.
  $75,000 or less for other filers.

 

How to Calculate your Modified Adjusted Gross Income (MAGI) to qualify for the EV Tax Credit

If you have not exceeded the income limitations, at this point you can start shopping for a used EV vehicle for purchase, but ensure you are aware of the vehicle type and age requirements outlined below, as well as the dealer qualifications..

Vehicle Eligibility

Vehicle types must belong to the following 3 categories.

• Electric vehicle
• Plug-in hybrid electric vehicles, or
• Fuel cell vehicle

Age Requirements

The qualified vehicle must be a model year that is two years previous to the year of purchase. So in 2024, you would need to find a vehicle manufactured in 2022 or before.

Price Requirements

The Vehicle sale price must be $25,000 or less.

Note that the sale price of a previously-owned clean vehicle is the total sale price agreed upon by the buyer and seller in a written contract at the time of sale, including any delivery charges and after the application of any incentives, but excluding separately-stated taxes and fees required by State or local law.

Dealer Requirements

The vehicle must be sold by a licensed dealer registered with the IRS. The dealer must provide the buyer with a time of sale report (also called a seller report), which will have information such as dealer name, address, VIN, make, model, placed in service date, and maximum credit.

To be a qualified sale, a transfer must be the first transfer since August 16, 2022, as shown by the vehicle history of the used clean vehicle after the sale to the person to whom the original vehicle was sold. Check the vehicle history report of the vehicle and see frequently asked questions about eligibility rules.

The rules can sound daunting, but if you qualify from an income and taxpayer standpoint, the vehicle eligibility and age requirements are typically your biggest hurdle in search for your new ride. If you able to find a qualified EV vehicle for under the $25,000, as long as you are buying from a licensed dealer, the good news is that most dealers selling EV’s are registered with the IRS to sell you the vehicle and ensure the tax credit savings. They should be happy to walk you through the process as we all know they are always ready to sell you a vehicle!

>>Which USED EV Cars actually qualify?

FAQS

What (and where) is my Modified Adjusted Gross Income?

How to Calculate your Modified Adjusted Gross Income (MAGI) to qualify for the EV Tax Credit:

1. Find your AGI your 1040, it is found on line 11
2. Add in any amount found on line 45, or line 50, on FORM 2555 (Foreign Earned Income)
3. Add back any amount of income you excluded from Puerto Rico

The total will be the MAGI used for qualification for the Clean Vehicle Credit Form 8936. In summary, if you never earned a dollar outside the traditional 50 states of America, you will simply use line 11, your adjusted gross income.

Are there any other Vehicle qualifications to consider?

We outlined the majority but there are a few other items you should also be aware of:

• EV’s and Plug in Hybrids must be made by a qualified manufacturer.
• Fuel cell vehicles do not need to be made by a qualified manufacturer to be eligible.

The vehicle must be:

• Under 14,000 pounds in gross vehicle weight.
• Have a battery capacity of at least 7 kilowatt hours and be an eligible fuel cell or plug-in electric vehicle.

The vehicle must NOT:

• Have already been transferred after August 16, 2022, to a qualified buyer.

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