Federal Incentives

Incentive Amount

Federal tax credit ranging from $2,500 to $7,500. The size of the credit is based on the battery size of the vehicle. Check our vehicle comparison for the amounts for each model.

Eligibility

Buyers of qualified new plug-in electric vehicles are eligible for the tax credit. The credits phase out over the course of a year once an individual manufacturer sells 200,000 qualifying vehicles. So far, Tesla and General Motors have completely phased out.

Toyota passed the 200,000 US EV sales mark as of July 1, 2022, which means starting October 1, 2022 the amount of the tax credit for Toyota plug-in models will be cut in half for six months. The credit will be further reduced to one-fourth of the original amount for sales starting April 1, 2023 before completely phasing out October 1, 2023. The IRS website includes a resource offering official information on the availability of a federal tax credit during the phase-out period.

The credit can only be claimed in the year the vehicle was put into service. The annual federal tax liability of the buyer may be a limiting factor in how much benefit you can receive.

For leased electric vehicles, the federal tax credit is claimed by the leasing company (since they are the owner of the vehicle). The leasing company will usually pass through a portion or all of the benefit to you as part of the lease deal. This will result in a lower down payment and/or lower monthly payments.

How to claim your incentive

For more information on how to claim the electric car tax credit, visit the U.S. Department of Energyʼs Fuel Efficient Vehicle Tax Information Center (see the "Claiming the Credit" section beneath the listing of models and tax credit amounts). The IRS also provides additional information on the forms and procedures for claiming the credit on their website.

2022 Inflation Reduction Act Potential Changes

The US Senate passed the Inflation Reduction Act on August 6, 2022. It's expected to pass the House the week of August 8th and be signed into law by President Biden soon after. This legislation includes many changes to the current federal tax credit program. Some of these changes will take effect on passage and others will be phased in over a period of years. If the bill moves forward it may be several months before all the rules around individual vehicle eligibility are finalized. Most provisions will take effect for EVs purchased after December 31, 2022. Changes include:

  1. Extension of Caps - The bill will eliminate the 200,000 USA EV sales phase-out trigger starting January 1, 2023. Instead, all EV purchases meeting eligibility requirements will be eligible for a tax credit through December 31, 2032.
  2. Manufacturing Origin - Effective on passage, vehicles must have final assembly completed in North America to be eligible. This will eliminate many popular EV models from the tax credit, although some may return in a few years if their manufacturing moves to North America. This article contains initial guidance on vehicles that may be impacted by this change and the potential of getting a binding purchase agreement in place to be grandfathered in to a credit.
  3. Transferable to Dealers - Starting January 2024, purchasers would be able to work through a participating dealership to have the value of the credit passed through at the point of sale. This could be especially helpful for EV purchasers with limited tax liability who previously may have been unable to take full advantage of the incentive.
  4. Income Eligibility - Non-commercial purchasers must meet Adjusted Gross Income (AGI) eligibility requirements of $150,000 or less for individual filers or $300,000 or less for joint filers.
  5. Price Caps - EVs must have a Manufacturer's Suggested Retail Price (MSRP) of $55,000 or less for passenger cars or $85,000 for SUVs, pick-up trucks and vans to be eligible.
  6. Amount of the Credit - Rather than basing the value of the credit on the amount of energy the EV battery can store as was previously done, the new provisions will require a minimum battery size of 7 kWh and then $3,750 of the credit will be determined by whether enough of the minerals used in the battery were sourced from the USA or a free trade partner and another $3,750 will be based on whether the value of the battery components meets requirements for North American sourcing.
  7. Used EV Credit - The bill also includes a new incentive that would offer 30%, up to $4,000 toward a used EV priced at $25,000 or less that has not previously received a federal tax credit for a used vehicle purchase. The income requirement for this for individual filers is an AGI of $75,000 or $150,000 for joint filers.
  8. Commercial EVs - Businesses using EVs could be eligible for a 30% tax credit, up to $7,500 for vehicles less than 14,000 pounds or up to $40,000 for vehicles over 14,000 pounds.
  9. Charging Infrastructure Tax Credit - The bill would restore a tax credit for charging infrastructure installation that previously ended on December 31, 2021. The amount of the credit is 30% of the actual equipment and installation costs, up to $100,000 per property. Costs for bi-directional charging equipment are eligible (e.g. Vehicle-to-home power systems). To be eligible, the charging equipment must be located in a disadvantaged community or outside of urban areas.

We will continue to update this page as information becomes available.