As sales of electric vehicles continue to grow in 2025, many new and prospective customers have questions about qualifying for a federal tax credit on EVs. Whether your vehicle qualifies or not is a simple yes or no question, but the amount you may qualify for varies by household due to a number of different factors. Luckily, we have compiled everything you need to know about tax credits for your new or current electric vehicle into one place.
The idea in theory is quite simple, per the IRS - "You may qualify for a credit up to $7,500 under Internal Revenue Code Section 30D if you buy a new, qualified plug-in EV or fuel cell electric vehicle (FCV). The Inflation Reduction Act of 2022 changed, but extended the terms for this credit for vehicles purchased between 2023 to 2032.
That said, you cannot simply go out and buy an electric vehicle and expect Uncle Sam to cut $7,500 off your taxes come April. In reality, the amount you qualify for is based on both your income tax as well as several specifications of the electric vehicle you purchase, including where it's built. More on that below.
First, let's take a second to truly understand how the Federal EV tax credit currently works.
First and foremost, it's important to understand three little words the government slips in front of the $7,500 credit - "may" and "up to." As in, you may qualify for up to $7,500 in federal tax credit for your electric vehicle. At first glance, this credit may sound like a simple flat rate, but that is unfortunately not the case.
For example, if you purchased a Tesla Model 3 and owed say, $3,500 in income tax for the year, then that is the federal tax credit you would receive. If you owed $10,000 in federal income tax, then you would qualify for the full $7,500 credit.
It's important to note that any unused portion of the $7,500 is not available as a refund nor as a credit for next year's taxes. Bummer.
The following terms were introduced by the Biden Administration in the summer of 2022 and went into effect on January 1, 2023:
Revamped used electric vehicle tax credit
Used EVs also got revised terms that now offer a credit equal to 30% percent of the sale price (up to $4,000). That should help consumers like yourselves get some change back in your pocket at the end of the fiscal year. As long as you stick to these terms as outlined by the IRS.
To qualify as a customer, you must:
For the used EV to qualify for federal tax credits, it must:
In May 2024, the IRS shared its final rules for the federal tax credit program. The original rules required qualifying vehicles to be assembled in North America alongside gradually higher percentages of battery materials and components to be produced on the continent and in countries with free trade agreements with the US.
Following months of difficulties amongst automakers trying to become compliant to qualify, the US Treasury Department and IRS have relaxed some of those parameters, including the sourcing of graphite, electrolyte salts, binders, and additives... at least until 2027.
This news follows an October 2023 update that pertained to the transferring of credits. Per the IRS:
The Internal Revenue Service issued proposed regulations, Revenue Procedure 2023-33 (PDF) and frequently asked questions today for the transfer of new and previously owned clean vehicle credits from the taxpayer to an eligible entity for vehicles placed in service after Dec. 31, 2023.
This "transfer" is essentially the ability of a new EV buyer to give the tax credit to the dealer selling them their shiny new EV. In exchange, the dealer can give the equivalent "in cash or in the form of a partial payment or down payment."
However, all the same eligibility criteria still apply even with a transfer, including the buyer having a federal tax burden.
The buyer must give the dealer all their tax information, which will then be submitted to the IRS. The dealer is not required to verify the information, and therefore, the disclosure falls on the buyer. All the other previous vehicle requirements, like MSRP limits, and for the buyers, like income limit requirements, apply here.
The only requirement that this update allows you to avoid is your tax burden. If, for some reason, you can afford to buy a new car and yet you happen to have a tax burden smaller than the full amount of tax credit you are eligible for, the IRS says that it won't "recapture" the difference.
Per the IRS, the following EVs qualify for federal tax credits if purchases between January 1 and December 31, 2025.
NOTE: Not every version of the models listed below will necessarily qualify. Please check with your local dealer/seller to determine the eligibility of your specific EV.
NOTE: Not every version of the models listed below will necessarily qualify. Please check with your local dealer/seller to determine the eligibility of your specific PHEV.
The US Department of Energy offers a VIN decoder tool to confirm where a given EV is assembled. Check it out here.
In addition to any federal credit you may or may not qualify for, there are a number of clean transportation laws, regulations, and funding opportunities available at the state level.
We've compiled every state rebate, tax credit, and exemption for you and sorted it by state. Whether it's a purchase or lease of a new or used EV or the purchase and installation of an EV charger, you could get money back, depending upon where you live.
Here are all those tax credits, rebates, and exemptions sorted by state.