The Fastest Way to Get Your EV Tax Credit

If you're thinking of buying an electric vehicle, you might have heard some myths and misconceptions about EV tax credits. The truth is, it's easier than ever to get EV tax credits when you buy an electric vehicle.

Not every EV will qualify for tax credits, and not every person can claim them -- there are some income limits for higher earners. But you don't have to do a bunch of extra paperwork. You also don't have to wait until next year's tax return to save money on your purchase (and free up cash for an EV auto insurance policy). You can get your EV tax credit immediately at the car dealership when you buy a qualifying electric vehicle.

Here's everything you need to know about how to get your EV tax credit "the fast way" in 2024.

1. How to get your EV tax credit: Go to a car dealership

Starting from Jan. 1, 2024, the IRS has new rules making it easier for car buyers to get their EV tax credits. If you choose an electric vehicle or plug-in hybrid vehicle that qualifies for EV tax credits, and your income is below a certain limit, you can get your EV tax credit immediately upon purchasing your car at a dealership.

Here's how the process works.

Car dealerships register with the IRS for the EV tax credit program

If your car dealership is participating in the EV tax credit program, the salesperson will tell you. Most dealerships want to make money from selling more electric vehicles, and will do what it takes to get this reliable income from the IRS.

Car dealerships will tell you which cars qualify for EV tax credits

There are lots of details involved with finding out which cars can get EV tax credits, especially for new cars. For example, if you want to buy a new EV that qualifies for the full $7,500 new EV tax credit, the vehicle must have final assembly in North America and its EV battery must be sourced from the U.S. or certain U.S.-allied countries.

Car dealers are required to keep track of these details, and it's in the dealer's best interest to get it right. You don't have to worry about proving to the IRS that your new car is eligible for a new EV tax credit -- if a new car qualifies for new EV tax credits, the dealership will share the details with you and the IRS.

But if you want to do your own research in advance before you go to the dealership, check out FuelEconomy.gov. You can use this site to search for full lists of cars that are eligible for EV tax credits:

• New EVs
• Pre-owned EVs

When you buy an EV from a car dealership, the dealership files paperwork with the IRS

You don't have to do anything extra to get the EV tax credit. The car dealership will file the paperwork for you. This is how the IRS gets confirmation that the car dealership sold you a qualifying, tax-credit-eligible electric vehicle. The document that car dealers file with the IRS is called a "time of sale" report.

You transfer your tax credit to the dealership, and you get a discount

Upon purchase of your vehicle, the dealership will give you a discount that is equal to the amount of EV tax credit. You're not "getting" a tax credit from the IRS directly; instead, you are "transferring" your car's tax credit to the dealership -- and the dealership gives you a discount for that same amount.

This works like a cash rebate or immediate discount on the price of the car. For example, let's say you buy a new EV that qualifies for the full $7,500 tax credit, and the sale price of the EV was $45,000. The dealership will reduce your purchase price to $37,500. You pay the dealer $37,500, and the dealer gets the $7,500 credit. It's like Uncle Sam is sitting there with you at the dealership, chipping in a few thousand dollars toward the purchase of your car. (Too bad there are no tax credits for car insurance.)

2. Keep this IRS form to file with your tax return next return

When you buy your car, ask the dealer to give you a copy of the "time of sale" report. This report includes details about your vehicle, such as the MSRP (for new EVs) or the used car sale price (for pre-owned).

The time of sale report is your proof to the IRS that you actually bought a vehicle that is eligible for an EV tax credit, and that you are following the rules. Keep your copy of the time of sale report, and file it with your tax return next year. You will also need to file Form 8936 with your tax return to show that you transferred the tax credit and have qualifying modified adjusted gross income (MAGI).

Bottom line

That's all it takes to get your EV tax credit in 2024: two steps. (With a few smaller steps mixed in along the way.) Buying an EV from an IRS-registered car dealership is the best, fastest, and only way to get EV tax credits in 2024. The good news is -- the dealership will take care of most of the paperwork.

The purchase price is not the only cost of owning an EV. You still need to pay for car insurance and EV charging. But with up to thousands of dollars of immediate discounts, EV tax credits can give you a strong start in the journey of electric vehicle ownership.