The 2024 EV Tax Credit: Big Rebate, Small List

The federal government's $7,500 tax break for electric vehicle purchases has never been easier to claim. But let's address the elephant in the room: There aren't that many EVs that qualify for the full or partial credit right now. 

While the discount is substantial, it applies only to electric vehicles that meet certain requirements, mostly around the sourcing and manufacturing of battery materials. 

Yes, the list of eligible EVs shrank considerably in 2024 as the requirements got tighter. But experts are optimistic. 

"I do expect that this [list] will increase over time," said Kate Whitefoot, an associate professor of engineering and public policy at Carnegie Mellon University. That's because it's going to take time for automakers to set up the domestic battery and mineral supply chains necessary to meet the tax credit requirements -- which are still relatively new, she said.  

Some experts believe you shouldn't wait for the list to grow. If you want an EV right now, there's no need to wait for more vehicles to qualify, said Peter Glenn, founder and co-CEO of EV Life, an EV finance platform. "The electric vehicle is like a savings account on wheels," he said, and the economics are already good for buyers in the market right now.

So how do you know which EVs are eligible for the credit, and which aren't? 

Thankfully, the government maintains a running list, which we break down for you below. But it's still important to understand the "why" behind the rules. Here's a rundown of how the tax credit works and what to expect. 

Tesla Model Y Rear-Wheel Drive

Starting at $45,380, the 2023 Tesla Model Y is an excellent balance of range and efficiency. It costs less than some combustion-powered sedans in its class after a federal tax credit of up to $7,500 and any qualifying state EV incentives. Shoppers with a bit more room in the budget can opt to upgrade to longer ranging and more powerful dual-motor variants, but this configuration's 260 miles is plenty for year-round daily driving with the occasional road trip.

See at Carvana

How the EV tax credit works

Up until last year, the EV tax credit worked like most others: You would purchase the EV at full price, then apply for the $7,500 credit after the fact and receive the discount when you filed your taxes. That meant customers had to be willing to front the full price of an EV and get a rebate months later.

But thanks to a recent rule change, participating car dealers can now apply the discount at the point of sale, meaning the customer sees a reduction in the sticker price and there's no need for you to file paperwork later. 

New electric vehicles can qualify for either the full $7,500 credit or a partial $3,750 credit (we'll get into why that is later). Also worth mentioning: There's a similar tax credit of up to $4,000 for used electric vehicles as well.

All EVs that qualify for the federal tax credit right now

The qualifying rules became stricter in 2024, which is why the list of eligible EVs got smaller. Federal rules dictate a few key thresholds that EVs must meet to qualify for the credit. Some of them are typical income and price limits, but others relate to where EV batteries are manufactured, and where the materials come from. 

Here is the most current list of qualifying EVs for purchases made after Jan.1, 2024.  

*Source: Fueleconomy.gov; Data accurate as of 2/2/24.

2024 EV tax credit requirements

So, why aren't all EVs eligible for the tax credit? 

The idea behind these requirements is twofold: To make sure the credits are going to people who need them and to incentivize domestic manufacturing of electric vehicles.

"It will be an exciting time," Glenn said. "Everyone's racing to meet this more virtuous goal that we have … And the result is more green jobs." 

"The long-term vision and net outcome is going to be very positive," Glenn said, referring to the potential growth in "green" auto jobs in the US.

MSRP

The tax credit has two caps on MSRP, essentially the sticker price of the car. The limit is $80,000 for vans, sport utility vehicles and pickup trucks, and $55,000 for all other EVs. To claim the tax credit, the total price of the vehicle has to be under those thresholds.

Critical minerals and battery component

Here's where the requirements get tricky. To qualify for the full credit, at least 40% of the "critical minerals" in the EV's battery must have been extracted or processed in the US or a country that has a free trade agreement with the US. And at least 50% of the EV's battery components must have been manufactured or assembled in the US or a country with a free trade agreement with the US. 

Income limits

The credit is available only to those who make less than a certain amount in "adjusted gross income." For married couples, the limit is $300,000 per year. For heads of households, the cap is $225,000. And for all others, the limit is $150,000 in annual income.

Assembly location

Any EVs that are eligible for the federal discount must "undergo final assembly" in North America (the US, Mexico or Canada).

Why some EVs get only partial versus full tax credit 

The federal tax credit isn't a simple on-off switch. Some vehicles that don't qualify for the full $7,500 still qualify for a partial credit.

This comes back to the battery sourcing rules. Vehicles that meet one, but not both, of these sourcing requirements qualify for the partial credit of $3,750. Again, the best way to know how this applies to any given vehicle is to check the government's list.

How to claim the EV tax credit in 2024 

Because dealerships are now able to offer the tax credit as a discount off the sticker price, there aren't many steps for the customer after a vehicle purchase.

Here's what to know before you buy if you want to use the 2024 EV tax credit. 

• Not all dealerships offer the instant tax credit upfront. Make sure to check with them before making a purchase, Whitefoot advises.

• According to Fueleconomy.gov, the official government source for fuel economy information, your auto dealership needs to confirm that your specific EV model qualifies for the tax credit and is responsible for providing you with an IRS time-of-sale report. 

• Double check that your income falls beneath the limits -- because the dealership isn't going to check for you. "There are some conditions there. A dealer can give you this, but the customer actually needs to understand" their income, Glenn said. Otherwise, the IRS could claw back the tax credit if the customer is above the income limit.

• Don't forget about state-level EV rebates, which could be stacked on top of the federal credit. Check with your state's energy department for details