Everything You Need to Know About the Used EV Tax Credit

If you’re considering purchasing a used electric vehicle (EV) or fuel cell vehicle (FCV), the used EV tax credit can save you up to $4,000. This federal incentive, effective from January 1, 2023, is designed to make clean vehicles more affordable. Below, we’ll break down everything you need to know about this credit, including eligibility, how to claim it, and what factors to consider before purchasing a used EV.

What is the Used EV Tax Credit?

The used EV tax credit is a government program offering a credit of 30% of the purchase price, up to $4,000, when buying a qualified used electric vehicle or fuel cell vehicle. To qualify, the vehicle must be purchased from a licensed dealer for $25,000 or less.

Eligibility Requirements for the Used EV Tax Credit

To qualify for the used EV rebate, both the buyer and the vehicle must meet specific criteria:

Buyer Criteria:

• The vehicle must be purchased for personal use, not resale.
• The buyer must not be the original owner.
• The buyer’s modified adjusted gross income (AGI) must be below:
  • $150,000 for married couples filing jointly
  • $112,500 for heads of households
  • $75,000 for single filers
• The buyer must not have claimed a used clean vehicle credit in the past three years.

Vehicle Criteria:

• Sale Price: Must be $25,000 or less.
• Model Year: Must be at least two years older than the year of purchase (e.g., a 2021 model can be purchased in 2023).
• Battery Capacity: Must have a minimum of 7 kWh of battery capacity.
• Vehicle Type: Must be a plug-in EV or FCV.

You might like: Is the Hummer EV Tax Credit Qualified? Everything You Need to Know

How to Claim the Used EV Tax Credit

You can either transfer the credit to the dealer at the time of purchase or claim it on your tax return. Here’s how:

1. Transfer at the Time of Purchase: If you transfer the credit, the dealer will apply it to reduce the price, and you’ll benefit from an immediate discount. The sale price must still be below $25,000 after the transfer.
2. Claim When Filing Taxes: If you choose to wait, you can claim the credit when filing your tax return by completing Form 8936. Ensure the dealer provides a time-of-sale report to confirm the details for IRS reporting.

Dealer Requirements

To ensure the used EV qualifies for the tax credit, the dealer must:

• Be licensed to sell vehicles.
• Provide essential information about the vehicle, such as its VIN, sale price, and battery capacity.
• Report the sale to the IRS.

Important Considerations

• Sale Price: The price includes optional equipment and dealer fees but excludes taxes, title, and registration fees.
• Trade-ins: If you trade in a vehicle, it does not affect the sale price for the tax credit calculation.
• State Incentives: Some states offer additional rebates for used EVs. Check with your state for local programs.

Final Thoughts

The used EV tax credit is a fantastic opportunity to make your next vehicle purchase more affordable while contributing to a greener planet. By following the eligibility guidelines and understanding how to claim the credit, you can significantly reduce your costs when buying a used electric vehicle. Whether you transfer the credit to the dealer or claim it later on your tax return, the benefits are clear. Always ensure the vehicle meets all qualifications, and don’t forget to check for any additional state incentives that may apply.

This incentive makes it easier than ever to make the switch to a used electric vehicle, offering savings and contributing to a sustainable future.

Questions about tax credit

1. Can you get used EV tax credit from a private seller?
   No, the used EV tax credit is only available when purchasing from a licensed dealer. Private sellers are not eligible.
2. How does used EV tax credit work?
   The used EV tax credit gives you 30% of the sale price, up to $4,000, for purchasing a qualified used electric or fuel cell vehicle. It’s available when buying from a licensed dealer for a vehicle priced under $25,000.
3. How to get used EV tax credit?
   To claim the used EV tax credit, buy a qualified vehicle from a licensed dealer, ensure it meets eligibility requirements, and file Form 8936 with your tax return to claim the credit.
4. How to calculate used EV tax credit?
   Calculate the credit by taking 30% of the sale price of the used EV, up to a maximum of $4,000. For example, on a $12,000 vehicle, the credit would be $3,600.
5. What is used EV tax credit?
   The used EV tax credit is a federal tax incentive that gives buyers 30% of the sale price (up to $4,000) when purchasing a qualified used electric or fuel cell vehicle from a licensed dealer.
6. What used EVs qualify for tax credit?
   Eligible used EVs must be purchased from a licensed dealer, have a sale price under $25,000, be at least 2 years old, and have a battery capacity of at least 7 kWh.
7. Which used EVs qualify for tax credit?
   Any used electric or fuel cell vehicle meeting these criteria qualifies:

• Priced under $25,000
• At least 2 years old
• 7 kWh battery or higher
• Purchased from a licensed dealer

8. Will used EV tax credit be available in 2025?
   Currently, there’s no indication that the used EV tax credit will end in 2025. It is part of ongoing federal incentives aimed at promoting cleaner vehicles. Always check for updates as policies evolve.

Read about: Best car insurance for EVs: Hidden Costs