EV Credits: What’s New in 2024?
The electric vehicle (EV) market is growing, but did you know the rules around EV tax credits have changed significantly since the Inflation Reduction Act of 2022? If you’re considering an EV, here’s everything you need to know to maximize your savings in 2024.
The 4 Ways to Benefit from Federal EV Credits
There are now four main ways to claim tax credits for electric vehicles:
- Purchase a New EV and claim the Clean Vehicle Credit (up to $7,500).
- Lease an EV and enjoy dealer discounts backed by the credit.
- Buy a Used EV and claim the Previously Owned Vehicle Credit (up to $4,000).
- Buy an EV for Business Use and claim the Commercial Clean Vehicle Credit.
Surprisingly, leasing an EV is now the most popular way to take advantage of these tax credits. Why? Let’s break it down.
1. The Clean Vehicle Credit (New EVs)
The Clean Vehicle Credit offers up to $7,500 but comes with strict rules:
Income Limits
- $300,000 for joint filers
- $225,000 for heads of households
- $150,000 for single filers
If your income exceeds these limits, you won’t qualify.
Price Caps
- $80,000 for vans, SUVs, and trucks
- $55,000 for all other vehicles
Domestic Content Requirements
The full $7,500 credit is split into two parts:
- $3,750 for meeting critical mineral sourcing requirements
- $3,750 for battery component requirements
Not all EVs qualify for the full credit. In fact, the number of eligible EVs dropped from 43 models in 2023 to just 19 at the start of 2024.
Pro Tip: Starting in 2024, you can claim the credit at the point of sale, meaning the dealer applies it directly to your purchase price.
2. Leasing an EV – The Smart Choice
If you don’t meet the requirements for a new EV credit, leasing may be your best option. Dealers can claim the $7,500 commercial clean vehicle credit and pass the savings on to you through:
- Lower monthly payments
- Smaller down payments
- Rebates
Why is leasing so popular?
- Fewer restrictions: No income or price caps!
- Technology flexibility: Lease for a few years, then upgrade to a newer model with improved tech.
Tip: Shop around—dealers aren’t required to pass the full credit to customers.
3. Previously Owned Clean Vehicle Credit (Used EVs)
Looking for a more budget-friendly EV? Used EVs also qualify for a tax credit. Here are the key details:
- Credit Amount: 30% of the price, up to $4,000
- Income Caps:
- $150,000 (joint filers)
- $112,500 (heads of households)
- $75,000 (single filers)
- Vehicle Price: Must be $25,000 or less
- Model Year: At least two years old
Used EVs must be purchased from a dealer, and you can claim this credit only once every three years.
4. Commercial Clean Vehicle Credit (For Business EVs)
If you’re purchasing an EV for business use, this credit is a game-changer. It’s not subject to income, price, or domestic sourcing restrictions, making it widely accessible.
Key Details:
- Maximum Credit: $7,500
- Calculation:
- 30% of the vehicle’s basis for full EVs
- 15% for plug-in hybrids (PHEVs)
Bonus: If you don’t use the full credit, it can be carried forward for 20 years or back 3 years to offset other taxes.
Takeaways: Which Credit Works for You?
Here’s a quick summary to help you decide:
- Clean Vehicle Credit: Up to $7,500, but strict income and price limits.
- Leasing: A hassle-free way to save with fewer restrictions.
- Used EV Credit: Great for budget buyers with vehicles under $25,000.
- Commercial Credit: Perfect for business owners with flexible limits.
Final Tip: Claim Your Credit at the Point of Sale
Starting in 2024, you can transfer your tax credit to the dealer, reducing the purchase price immediately. This is a huge win for buyers, as it bypasses the need to wait until tax season.
Whether you’re buying new, used, or leasing, there’s an option to help you save. The EV landscape is changing fast—now’s the time to jump on the road to savings!
By understanding your options, you can make a confident and informed decision on your next electric vehicle purchase.
Have questions about EV tax credits? Share your thoughts in the comments below or consult with your tax advisor to explore these benefits!