Before making a vehicle purchase, there are other factors to consider beyond the look and brand name. You should verify the vehicle’s eligibility for a federal tax credit. Tax credits are a crucial consideration, which is why Electric Vehicles (EVs) are topping sales charts due to their tax incentives. If you own plug-in hybrid electrical vehicles, a hydrogen fuel cell vehicle, or a fuel cell electric vehicle, you might be eligible for a federal tax credit that could save you thousands of dollars. Unfortunately, not all cars qualify for a tax credit, and the eligibility criteria can be complex and technical. So, what cars qualify for a tax credit? Let’s break down everything you need to know about qualifying for a tax credit.
What is a Car Tax Credit?
When you hear tax credit, what comes to mind? A tax credit is an incentive, similar to a discount on your taxes, that reduces the amount you owe the government when you file your taxes. Likewise, a car tax credit is an incentive offered to taxpayers when they buy qualified vehicles. A good example is the United States federal electric vehicle (EV) tax credit. The purpose of this EV tax credit is to encourage the purchase of eco-friendly vehicles within North America. When you meet this specification, your credit will be applied to your federal income tax liability in return. This reduces the amount you owe the Internal Revenue Service (IRS) to a certain degree after filing your taxes.
As of 2025, the US federal government offers up to $7,500 for eligible new electric vehicles and $4,000 for used electric cars, while other cars get a lower clean vehicle credit. To access these sums, you must meet a certain level of earning power. Likewise, the vehicle you’re buying must meet specifications laid down by the IRS. Also, for used cars, a clean vehicle tax must be initiated at the time of sale. If you’re unsure of a purchase, don’t initiate the tax credit yet to avoid forfeiting your opportunity for a car tax credit.
Requirements for a Car to Qualify For a Tax Credit
What cars qualify for a tax credit? Does my car qualify for a tax credit? If you’re asking these questions, you must pay attention to what is required for a car to qualify for a tax credit. When looking for vehicles that qualify for tax credits, a registered dealership is one of the best ways to find a car for sale. You should be aware that the brain behind the tax credit aims to focus its use on sustainable vehicles assembled in the United States. To this end, the government has established rules that both the car and the buyer must comply with.
Eligible Vehicle Requirements
For the vehicle requirements, the vehicle must be assembled in North America. If not assembled, it must be assembled within the United States, Mexico, Canada, or anywhere within North America. Also, the critical minerals of the car battery you’re purchasing must contain a portion of battery minerals sourced from the US or US trade partners. In addition, the price limit for sedans should be $55,000 and $80,000 for SUVs, vans, and pickup trucks, so you need to get a good deal when buying your car to stay within the purchasing range.
Buyer’s Requirements
Not only does the car have to meet requirements, but buyers also need to meet specific eligibility requirements. These requirements vary with the person’s marital status. Likewise, you must meet income requirements, which vary with the vehicle you’re buying, whether new or used. You should also note that you can’t apply for the same credit on the exact vehicle more than once.
New Vehicles That Qualify for Tax Credit
If you’re shopping for a new vehicle, you’re probably looking for the best deals, including getting a tax credit that reduces the selling price to some extent. According to the Internal Revenue Code Section 30D, as of this year, if you’re buying a new vehicle, plug-in EV, or Fuel Cell Vehicle (FCV), you qualify for up to $7,500 tax credit.
If you’re shopping for a car, it’s important that you know what types of cars are eligible for tax credits. This is because this changes over time and the change is based on different factors, which are not limited to tax rules, vehicle models, and updates from car manufacturers. To confirm the eligibility of the car you’re about to buy, you can check with the IRS or FuelEconomy.gov for more recent information.
You need to meet specific income requirements to be eligible for a tax credit for your car purchase. A single filer who wants to buy a new vehicle must earn approximately $150,000 per month. Family heads, on the other hand, should meet a household level of $225,000. Married couples that are joint filers must have a combined household income of a minimum of $300,000 per month. Likewise, any car you want to purchase as a joint filer must be for personal purposes only and not for resale. If the car to be purchased is an EV, it must have a gross vehicle weight rating under $14,000.
If you made your vehicle purchase, here’s a list of some eligible battery and fuel cell electric vehicles purchases in 2023 and after that qualify for the tax credit as of 2025:
- Cadillac Lyriq EV (2022-2024)
- Chevrolet Silverado EV (2024)
- Ford E-Transit (2022-2023)
- Lincoln Corsair Grand Touring PHEV (2022-2023)
- Nissan Leaf(S) EV (2021-2023)
- Rivian R1S EV (2022-2023)
- Tesla Model 3 Long Range EV (2022-2023)
- Volkswagen ID4 EV (2023)
- Volvo S60 Extended Range PHEV (2022)
- Chevrolet Blazer EV (2024-2025)
- Honda Prologue EV (2024)
- Rivian R1T Quad Large EV (2022-2024)
- Tesla Model Y Performance EV (2023-2025)
Also, please note that you will need to confirm with your dealer to determine the eligibility of the vehicle you’re about to purchase.
Used Electric Vehicles That Qualify for Tax Credit
New vehicles don’t just qualify for a tax credit; some used vehicles also qualify under certain conditions, and you might benefit from $4,000 in tax savings. To qualify for a used vehicle tax credit, the vehicle must be either an electric vehicle (EV), a plug-in hybrid electric vehicle (PHEV), or a fuel cell vehicle (FCV). Since used cars are still in demand, you might be considering used EVs that can benefit you tax-wise.
If you want to buy a used car, the purchase price must be $25,000 or less, and the purchase must be through a licensed dealer. Also, note that during the sale, your dealer must provide you with updates on the car’s condition and assist with a car inspection. This is another reason why you should buy from a registered dealership. The information you provide about a vehicle is not sufficient. Your seller must register with the IRS online and provide the same information that you have provided. If they don’t, you might miss out on the tax credit eligibility.
You need to meet certain income requirements if you’re buying a used vehicle and want to claim a tax credit. If you’re single filers, you must have an income of not more than $75,000 per month. For couples filing jointly, they must have a monthly income of $150,000. In addition to all these requirements, you must not have claimed a used EV credit in the past 3 years. Likewise, any purchase you made before 2023 doesn’t qualify.
The following are some of the clean vehicles that can qualify for a tax credit as of 2025:
- Toyota Mirai FCV (2016-2022)
- Volvo XC40 Recharge EV (2021-2023)
- Kia Soul EV (2015-2020)
- Hyundai Nexo Blue FCV (2019-2023)
- BMW 530e PHEV (2018-2023)
- Tesla Cybertruck EV (2023)
- Hyundai Ioniq PHEV (2018-2022)
- Jaguar I-Pace EV (2019-2023)
- Audi e-tron EV (2019, 2021-2023)
- Mazda MX-30 EV (2022-2023)
- Hyundai Nexo FCV (2019-2023)
- Volvo S60 PHEV (2019-2023)
- Tesla Roadster EV (2009-2011)
- Chrysler Pacifica Hybrid PHEV (2017-2023)
- Mitsubishi i-MiEV (2012-2014, 2016-2017)
- Kia EV6 (2022-2023)
- Ford Mustang Mach EV (2021-2023)
- Genesis GV60 EV (2023)
- Nissan Leaf EV (all models) (2011-2023)
- Subaru Solterra EV (2023)
- Porsche Taycan all models (2022-2023)
- Hyundai Kona Ev (2023)
- BMW i3 sedan (2014-2021)
- Volksagen e-Golf (2015-2019)
- Chevrolet Spark EV (2014-2016)
How to Claim a Car Tax Credit
Now that you know that your car qualifies for a tax credit, how do you claim it? Previously, you had to wait till it’s tax season before you could claim a tax credit. The good news is that you no longer have to wait. You can now do a clean vehicle credit transfer to the dealership at the time of purchase, which reduces the sales price immediately.
Before proceeding, ensure that the dealership you’re patronising is registered with the IRS; this will facilitate a smooth tax transfer process. Your dealer is responsible for updating the IRS on the purchase process within 3 days of purchase. If successful, you will receive a copy of the Time of Sale Report after completing the purchase. You have to keep this copy for reference purposes. If your dealer did not provide you with a copy of this report, ask questions and ensure they obtain another copy. Unfortunately, if your time-of-sale report is not successfully submitted, it means you did not meet the eligibility criteria.
If you prefer to claim your tax credit at tax time, you will have to file an IRS Form 8936 when you’re filing your tax return for the year, which you might get after the purchasing process. You must include the vehicle’s details, which include the Vehicle Identification Number (VIN), purchase date, and price, all of which you will submit with your federal income tax return.
Conclusion
You can see a car tax credit as a car sale discount that can help reduce the cost of the vehicle you’re able to purchase significantly. Whether new or used, this provides a significant relief. As a buyer, all you need to do is meet the eligibility requirements and understand the applicable rules. Likewise, the vehicle you are purchasing must also meet specific clean vehicle tax credit requirements, especially for used vehicles. For an easier purchase and tax transfer, you can check with the IRS and fueleconomy.gov.
