Business
Changes coming to $7,500 EV tax credit in 2024
By Jake Beardslee · January 2, 2024
In brief…
- The federal EV tax credit will become an instant rebate up to $7,500 at dealerships starting in 2024, no longer capped at tax liability.
- Stricter requirements on sourcing and manufacturing will likely reduce qualifying models.
- Leased EVs avoid restrictions, and separate used and commercial credits also exist.
- The qualifying list changes frequently; check fueleconomy.gov for updates.
The federal tax credit for purchasing electric vehicles, currently worth up to $7,500, will undergo significant changes starting January 2024 according to the Biden administration’s efforts to accelerate the transition to EVs, reports NPR.
While the credit will become an instant rebate at dealerships, fewer models will likely qualify due to stricter requirements on domestic manufacturing and materials sourcing.
Buyers can receive the full $7,500 credit regardless of tax liability by attesting income eligibility and intended personal use. The income caps are $300,000 for married joint filers, $225,000 for heads of households, and $150,000 for others. Prior tax credit rules capped the credit at the amount owed in taxes.
Vehicles must also be assembled in North America with a sticker price under $55,000 for cars or $80,000 for trucks and SUVs. Raw battery materials increasingly need to be mined or processed domestically or from trade partners, and battery components can’t come from China, per the rules.
Those leasing EVs can bypass restrictions, as credits go to leasing companies. Separate used EV credits worth up to $4,000 exist for sub-$25,000 vehicles from model year 2022 or earlier, bought from registered dealers. Businesses can also receive credits up to $40,000 for commercial vehicles.