Understanding the Used Electric Vehicle Tax Credit - UPDATED for 2024

Start here, the official list of used vehicles that qualify.  The official IRS rules are here.

The federal tax credit for used EV's began Jan 1, 2023 and will expire Dec 31, 2032.  It does not apply to used EV's purchased before 1/1/23.

The tax credit is 30% of the sale price of a used EV with a $4,000 cap!

Starting Jan 1, 2024, the credit may be applied at time of sale by dealer. (Page 391, line 15)^{(see note below)}, AKA "Cash on the Hood". Rather than claim the credit yourself at tax time, you can transfer the credit to the dealer, and the dealer reduces the up front price by that amount. Dealers: Rules similar to the rules of section 30D(g) shall apply.

All of these requirements must be satisfied (don't worry, they're not hard!):

• Used vehicle must be at least two model years old at time of sale. (Page 389, line 7).  So, for a purchase in 2024, used EVs up to and including the 2022 model year qualify.

• The original use of the vehicle must have occurred with an individual other than the one claiming the used tax credit. (Page 389, line 10), i.e. Someone else was the original owner.

• Used vehicle must be purchased from a dealer. (Page 390, line 3).  A dealer has a state or DC-issued dealer license.

• Used vehicle price before the credit must be $25k or less. (Page 390, line 5).  If a dealer sets the price at $29k and says the price will go down to $25k after you transfer your credit to them, walk away. The intention is for you to pay for a $25k car with $21k of your cash, and your $4k tax credit. After Jan 1, 2024, you can transfer the credit to the dealer at purchase.
  

• The battery must be at least 7kWh.  Thus all EVs and almost all plug-in hybrids qualify, including all years of the Chevy Volt, but notably, not 2013-2016 Toyota Prius Plug-In Hybrids, which have a 4.4 kWh battery.  2017 and later Plug-In Prius models qualify.  To verify a particular model, you can search the offically maintained table, and/or the EVADC Info Sheet of the particular year for battery size.
  

• Used vehicle qualifies for tax credit only once in its lifetime. (Page 390, line 7). The IRS will track tax credits applied to vehicles via the VIN number reported by the dealer.  The dealer should give you a "Time of Sale" report, which includes the VIN, your tax ID, the dealer tax ID, battery capacity, sale date and sale price, maximum allowable credit under 25E (found by using the official IRS calculator).  MAKE SURE YOU GET THIS AT OR BEFORE TAKING DELIVERY, you will need it at tax time.
  

• Purchaser must be an individual (no businesses), buying for use not resale, and not be claimed as a dependent on another tax return. (Page 390, line 14).

• Purchaser can not have claimed a used EV credit for this or any other vehicle in the three years prior to the date of sale. Page 390, line 20). Purchaser may only claim one used EV credit per three years.
  

• Modified adjusted gross income cap of $75k for individuals, $112,500 for head of household and $150k for joint returns. (Page 388). You can use the AGI from the year you take delivery or the prior year, whichever is less.   The AGI is generally found on line 11 of IRS 1040.
  

If all of the above requirements are met, congratulations!  File IRS Form 8936 (for used EVs and PHEVs purchased in 2023) with your tax return for the year in which you take possession of your vehicle, including if you have already assigned the credit to the dealer after 1/1/2024.  If buying on or after 1/1/2024, the dealer will give you a "Time of Sale" report, which you will file with your IRS 8936.

Allied EV organization Recurrent has published a guide for selecting used EV's and a guide on the used EV tax credit, which includes a VIN lookup tool which is useful if you are shopping on the web, since many web sites show the VIN.

The IRS also has a handy table listing all currently qualifying used EV model years and models.

If you want in-person buying advice from experienced EV drivers, who aren't selling cars but who only want to help you successfully make the transistion from driving on gasoline to driving on electricity, consider coming to EVADC's Ask An EV Owner!

Note:  The page citations in this article are taken from the text of the IRA law (hey, we're in Washington DC after all!)