How to Apply for EV Tax Credits

Looking to buy a new car in 2024? One good way to reduce your cost of car ownership is to get a big discount when buying a vehicle. Some of the best discounts can be found on electric vehicles, with the federal government's EV tax credits.

EV tax credits give you an immediate discount of up to $7,500 on a new electric vehicle, or up to $4,000 on a pre-owned EV. Worried about how to apply? Don't be -- the process is easier than ever before. You don't have to "apply" for EV tax credits, you just have to buy a qualifying vehicle and get your EV tax credit discount at the car dealership.

Let's look at how to apply for EV tax credits, and how this program can help you save big money on buying a new (or used) car in 2024.

Step 1: Decide which electric vehicle you want to buy

Before you go to a car dealership or start shopping for an electric vehicle online, find out which EVs qualify for the tax credits. Start by going to FuelEconomy.gov to check out the full list of new EVs that can get tax credits. There's also a separate page on FuelEconomy.gov that shows a full list of qualifying pre-owned EVs.

Keep in mind that fully-electric vehicles like Teslas are not the only cars that can get EV tax credits. Some new and used plug-in hybrid electric vehicles (PHEVs) and fuel cell vehicles can also qualify. Here are a few examples (according to FuelEconomy.gov as of March 1, 2024).

New vehicles eligible for $7,500 EV tax credits

• Cadillac Lyriq
• Chevrolet Bolt EV and EUV
• Chrysler Pacifica Plug-in Hybrid
• Ford F-150 Lightning (Extended Range and Standard Range Battery)
• Tesla Model 3 Performance
• Tesla Model X Long-Range
• Tesla Model Y (All-Wheel Drive, Performance, and Rear-Wheel Drive)

Pre-owned vehicles eligible for up to $4,000 of used EV tax credits

The pre-owned EV tax credit is 30% of the used car's sale price, up to $4,000. To get this tax credit, you must buy a car that is at least two model years older than the current year, with a sale price of $25,000 or less.

Here are a few qualifying used EVs and plug-in hybrids eligible for used EV tax credits, with model years shown:

• Ford Escape Plug-in Hybrid (2020-2022)
• Ford Mustang Mach-E (2021-2022)
• Hyundai Ioniq 5 (2022)
• Mercedes-Benz EQB SUV (2022)
• Mitsubishi Outlander Plug-in Hybrid (2018-2022)
• Nissan Leaf (2011-2022)
• Toyota Prius Prime Plug-in Hybrid (2017-2022)

New EV tax credits are limited to mostly American car companies, or cars made in America. But if you buy a used EV or plug-in hybrid, you can get used EV tax credits on a much wider range of foreign car companies and lots of interesting car models.

To search for the full list of qualifying makes, models, and model years eligible for EV tax credits, check out FuelEconomy.gov.

Step 2: Make sure your income qualifies for EV tax credits

Before you get too excited about buying an electric vehicle, make sure your income qualifies for the EV tax credits. That's right: there are income limits.

To get EV tax credits on a new vehicle, your modified adjusted gross income (AGI) must be:

• $150,000 or less for single filers
• $225,000 or less for heads of household
• $300,000 or less for married couples filing jointly

To get EV tax credits on a used vehicle, your modified AGI must be:

• $75,000 or less for single filers
• $112,500 or less for heads of household
• $150,000 or less for married couples filing jointly

Good news -- you can use last year's or this year's income to qualify for EV tax credits, whichever is less. So if your AGI was low enough in 2023 to qualify, you can buy an EV in 2024 and get tax credits, even if your 2024 income is too high.

Step 3: Go to a car dealership and buy an EV

Demand for EVs has slowed slightly in 2024, so some dealers might be willing to give you a better price than usual, especially on used electric vehicles. Once you have agreed on a purchase price, the dealership will help you get your EV tax credit.

Dealerships are required to register with the IRS to process the EV tax credits, and will help handle the paperwork. When you buy your car, you "transfer" your tax credit to the dealership, which gives you the tax credit amount as an immediate discount. For example, if you buy a new EV for $50,000 MSRP and it qualifies for the full $7,500 tax credit, the dealership paperwork will show that the actual price you paid is $42,500.

Step 4: Get the time of sale report from the dealership

The dealership will give you a time-of-sale report to keep for your records, which shows you bought a car that qualifies for tax credits. You also will need to file IRS Form 8936 with your next tax return, to show you transferred your EV tax credit to the dealership.

Bottom line

EV tax credits won't save you money on car insurance, but they can get you a significant discount when buying a new or used electric vehicle. There are some big discounts available in 2024 on used electric vehicles. If you're worried about EV battery range, consider a plug-in hybrid vehicle that runs on gas -- no range anxiety, and you can still get tax credits. And before you get your heart set on a new car, shop around for EV car insurance quotes. The best auto insurers may be able to save you money on coverage.