How to Maximize Your Savings with the 2024 EV Tax Credit

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How Does the EV Tax Credit Work?

Here’s some good news for car buyers: In 2023, the average price of an electric vehicle (EV) dropped by 17.7%, according to Cox Automotive. However, the average price still stands at $50,798. Despite this, lower prices, manufacturer and dealer incentives, high gas prices, and a $7,500 federal tax credit for new EVs can make these vehicles more affordable.

In 2024, the federal EV tax credit offers up to $7,500 that can be applied directly to your purchase price, reducing the cost of your new EV upfront. Vehicle restrictions and income requirements apply, but you can still get a significant tax credit when you purchase an eligible new EV. Read on for more details.

Changes to the EV Tax Credit for 2024

In 2024, the EV tax credit introduces new vehicle requirements and income limits for taxpayers. The most significant change is in how you claim the credit. Starting in 2024, you’ll need an approved time-of-sale report when you purchase your vehicle. This report can be used to claim the credit on your tax return or transferred to your dealer to apply it to your vehicle’s final purchase price. This new system allows the credit to act as an immediate discount, reducing your upfront cost and/or the amount you need to finance.

New Vehicle Requirements

New sourcing requirements that began in mid-2023 continue into 2024. Qualifying vehicles must undergo final assembly in North America and meet sourcing requirements for battery components and critical minerals. Vehicles can qualify for a $3,750 credit for meeting battery part requirements and another $3,750 for meeting critical minerals requirements, totaling $7,500.

As of February 2024, only eight manufacturers offer eligible vehicles:

• Chevy
• Chrysler
• Ford
• Jeep
• Lincoln
• Rivian
• Tesla
• Volkswagen

Additionally, passenger cars must have a manufacturer’s suggested retail price (MSRP) of $55,000 or less; $80,000 or less for vans, SUVs, and light trucks.

Income Limits

To qualify for the 2024 credit, your adjusted gross income (AGI) must be below IRS limits: $150,000 for single filers, $225,000 for heads of household, and $300,000 for married couples filing jointly.

How to Qualify for the 2024 EV Tax Credit

Follow this quick eligibility checklist to determine whether you qualify for the 2024 EV tax credit:

• Your vehicle will be for personal use in the U.S. It must be for personal use and not resale, and it must be used primarily in the U.S.
• Your income doesn’t exceed IRS limits. You can use your AGI from this year or last. Check your AGI on last year’s tax return: It’s line 11 on Form 1040. If your prior year’s AGI qualifies you, you’re good to go. If not, estimate your current-year AGI. If your AGI exceeds the limit when you file your taxes, you’ll have to repay the IRS for any credit you received.
• Choose a qualifying vehicle. Check the full list of qualifying vehicles on FuelEconomy.gov and consult with your dealer about eligibility requirements.
• Find a registered dealer. To claim the credit in 2024, work with a dealer registered with IRS Energy Credits Online. Confirm that your dealer can handle the transaction if you want to apply your credit toward the vehicle’s price.

How to Claim the Federal EV Tax Credit

If you meet the eligibility requirements and are ready to make a purchase, your dealer will use the IRS Energy Credits Online website to apply for an approved time-of-sale report. You can decide whether you’d like the dealer to transfer your credit and apply it to your final cost.

Whether you transfer your credit and use it immediately or save it for tax time, you’ll need to complete IRS Form 8936 and submit it with your tax return to officially claim the credit.

Frequently Asked Questions

• Do Electric and Hybrid Cars Really Save You Money?
• Do Used EVs Qualify for a Tax Credit?
• What Is the Income Limit for the EV Tax Credit?

The Bottom Line

Though meeting EV tax credit requirements is a bit complicated in 2024, a $7,500 price reduction can significantly help make a clean energy vehicle more affordable. Applying your tax credit at the point of sale makes the 2024 credit more useful when working with a limited budget.

Even with tax credits, financing a new EV, plug-in hybrid, or fuel-cell EV requires planning and good credit. If you’re considering a new vehicle purchase, now may be a good time to check your credit score and credit report for free with Experian. You’ll get a clearer picture of your financing options so you can explore the best loan opportunities based on your situation.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you with all your financing needs!

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