EV Tax Credit Guide 2025: How to Claim Up to $7,500
The Inflation Reduction Act's EV tax credit reaches $7,500 for new vehicles and $4,000 for used. Here's exactly who qualifies, what cars are eligible, and how to claim it on Form 8936.
By GasVsElectric
:::caution[Update — October 2025] The federal EV tax credits described in this article have expired. The One Big Beautiful Bill Act (P.L. 119-21, signed July 4, 2025) repealed both the Section 30D new clean vehicle credit and the Section 25E used clean vehicle credit for vehicles acquired after September 30, 2025. This article is preserved for historical reference. For current EV incentives, check your state’s energy office — some states (Colorado, New York, and others) maintain separate state-level programs. :::
The federal EV tax credit has been reshaped more than once since the Inflation Reduction Act passed in August 2022, and 2025 brings one major convenience: you can now transfer the credit directly to your dealer at point of sale, meaning you get the discount upfront instead of waiting for your tax return.
Here’s what you need to know before you sign anything.
How the Credit Works
The credit is nonrefundable — it reduces your tax liability dollar-for-dollar, but if you owe less than the credit, you don’t get the difference back as a refund. It lives on Form 8936, “Qualified Plug-in Electric Drive Motor Vehicle Credit,” which you (or your tax preparer) file with your federal return.
Starting in 2024, dealers enrolled with the IRS can apply the credit directly against the purchase price. You essentially assign your credit to the dealer, who reduces your out-of-pocket cost immediately. The dealer then gets reimbursed by the IRS. This is almost always the better move — money now beats money next April.
New vs. Used Vehicle Credits
| Credit Type | Amount | Vehicle Age |
|---|---|---|
| New EV | Up to $7,500 | New only |
| Used EV | Up to $4,000 | 2+ years old |
The new vehicle credit splits into two $3,750 halves: one for meeting North American final assembly requirements, one for battery mineral sourcing. A vehicle must meet both to earn the full $7,500; if it meets only one, you get $3,750.
The used vehicle credit is 30% of the sale price, capped at $4,000. The vehicle must be at least two model years old and purchased from a dealer (private-party sales don’t qualify).
Income Limits
The IRS uses your Modified Adjusted Gross Income (MAGI) from either the current year or the prior year — whichever is lower — so there’s a small planning window.
New vehicle income caps:
- Single filers: $150,000
- Head of household: $225,000
- Married filing jointly: $300,000
Used vehicle income caps (lower thresholds):
- Single: $75,000
- Head of household: $112,500
- Married filing jointly: $150,000
If your income is close to the limit, the IRS allows you to use your prior-year MAGI. If you qualified last year but not this year, you can still claim the credit — a useful loophole worth knowing.
MSRP Caps
Eligible vehicles must come in under strict MSRP ceilings. “MSRP” here means the manufacturer’s suggested retail price, not the sticker price after dealer markups — dealer add-ons don’t count against you.
- Vans, SUVs, and pickup trucks: $80,000
- All other passenger vehicles: $55,000
Several popular models that cleared these caps in 2024 include the Chevrolet Equinox EV, Tesla Model 3 (Standard Range), and Ford F-150 Lightning (Standard Range). The Tesla Model S, Rivian R1T, and BMW i7 all exceed the limits.
Qualifying Vehicles for 2025
The IRS publishes a live list at fueleconomy.gov. It changes frequently as manufacturers update their battery sourcing agreements, so check before you buy — don’t rely on a sales rep’s word.
Key eligibility rules:
- Final assembly must occur in North America
- Battery capacity must be at least 7 kWh
- Vehicle must be purchased new (or used, for the used credit)
How to Claim It: Form 8936
If you’re not using the dealer transfer option, file Form 8936 with your federal return. You’ll need:
- The vehicle’s VIN
- The date of purchase
- The make, model, and year
- Confirmation that you’re the original owner (for new vehicle credits)
Your dealer is required to provide IRS Form 15400 at the point of sale, which captures the VIN and credit amount. Keep that document.
State Credits on Top of the Federal Credit
Several states layer their own incentives on top of the federal credit. Colorado offers up to $5,000. California’s Clean Vehicle Rebate Project was replaced by the Clean Cars 4 All program, which targets income-qualifying buyers. New York offers up to $2,000 through the Drive Clean Rebate.
State programs have their own income limits, vehicle lists, and funding availability — they can run out mid-year. Check your state’s energy office website for current terms.
Is It Worth It?
If you’re buying a qualifying vehicle and your income is under the limit, the credit is essentially free money — there’s no scenario where claiming it hurts you. The math gets interesting only if you’re weighing a $56,000 EV (over the cap) against a $54,000 model that qualifies. In that case, the $7,500 credit on the cheaper car may more than offset a real preference for the pricier one.
Use our calculator to run the full 5-year cost comparison for any EV against its closest gas equivalent, including the tax credit, fuel savings, and estimated maintenance costs.