The $7,500 EV Tax Credit – What You Need to Know to Help You Save On An Electric Car

electric vehicle charging at a station

As electric vehicles (EVs) continue to grow in popularity, the US government and several US states have implemented various incentives to encourage EV adoption. One of the most significant incentives is the federal EV tax credit, which offers up to $7,500 in tax savings for the purchase of an eligible electric vehicle. The federal EV tax credit has been available in the US since 2008. It was initially introduced as part of the Energy Improvement and Extension Act of 2008, which aimed to promote the adoption of electric vehicles as a way to reduce dependence on foreign oil, cut greenhouse gas emissions, and improve air quality in urban areas.

This tax credit has been instrumental in driving EV sales, especially as the cost of electric vehicles has become more competitive with traditional gas-powered vehicles. The federal EV tax credit provides an additional financial incentive for consumers to make the switch to electric vehicles, helping to further accelerate the growth of the EV market in the US.


What is the $7500 Federal EV Tax Credit?


The federal EV tax credit is a program that offers a tax credit to consumers who purchase qualifying electric vehicles (EVs). The tax credit is designed to incentivize the purchase of EVs, which are more environmentally friendly than traditional gasoline-powered vehicles.


Which EVs qualify for the federal EV tax credit?


To qualify for tax credit, the EV you’re considering must meet the following requirements:

– Have a battery capacity of at least 7 kilowatt hours (kWh)
– Weigh less than 14,000 pounds

– Be made by a qualified manufacturer. See our list of qualified EV manufacturers and vehicles.

– Fuel Cell Vehicles (FCEV) do not need to be made by a qualified manufacturer to be eligible. 

– Be assembled in North America


There are also a couple of other key points to note that are important to follow in order to claim the EV tax credit.


– Your auto dealer must also report the required information to  you and the IRS at the time of purchase of your vehicle.

– You must also report your name and Social Security Number (SSN) or Taxpayer Identification Number (TIN) 


Is there a price limit on EVs that qualify for the EV tax credit?


Yes, the EV you’re considering manufacturer suggested retail price (MSRP) can’t be higher than:

– $80,000 for vans, sport utility vehicles and pickup trucks

– $55,000 for other vehicles


MSRP is the retail price of the automobile suggested by the manufacturer, including options, accessories and trim but excluding destination fees. This won’t necessarily be the price you pay for your EV, but includes several factors including the manufacturer’s policy, dealer policy, as well as your own decision for what you are willing to pay for your EV. 


Can I claim the EV tax credit on a used EV?

Unfortunately, the EV tax credit only applies to new vehicles. 


Which EVs qualify for the federal EV tax credit?


There are many great EVs currently on the market, with new models being released throughout the year. See our list of qualifying EVs here. 

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Are there any other EV tax credits in addition to the federal EV tax credit?


Yes, there are some other EV tax credits in addition to the federal EV tax credit:


State EV Tax Credits


Some states in the US also offer their own EV tax credits, incentives, or rebates to encourage the purchase of electric vehicles. These credits vary by state and can range from a few hundred dollars to several thousand dollars.


California has the Clean Vehicle Rebate Project (CVRP), which offers tax credits of up to $7,500 for qualifying EVs.


Texas offers the Texas Emission Reduction Program (TERP), which as rebates of up to $2,500 toward the purchase or lease of a battery electric vehicle (BEV) or plug-in hybrid vehicle (PHEV). 


Alternative Fuel Vehicle Refueling Property Credit:


This tax credit applies to the installation of home charging stations for electric vehicles. Taxpayers can receive a credit of up to 30% of the cost of the charging station installation, up to a maximum of $1,000.


It’s important to note that the availability and amount of these credits vary by state and may change over time. Therefore, it’s recommended to check with your state and local governments, as well as with a tax professional, to determine if there are any additional tax credits or incentives available to you for purchasing or using an electric vehicle.


Overall, the federal EV tax credit program can be a key benefit in helping you make the transition to an EV. The US government has been quite active in implementing policies that area focused on reducing carbon emissions.  Cleaner and more sustainable transportation options has been a key focus for the federal government and several states.


In addition to this guide, we encourage you to continue to do your research in order to choose a qualifying electric vehicle, as well as get the maximum available federal and state tax credits to apply toward the purchase of your EV.

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