If you purchase a qualifying new or previously owned plug-in or hybrid electric vehicle (EV) or fuel cell electric vehicle (FCV) this year, you may qualify for a tax credit. Generally, the credits are nonrefundable, meaning they can only reduce your tax liability to zero; you cannot get back more on the credit than you owe in taxes. However, you also have the option to transfer the credit to an eligible dealership at the point of sale and receive a corresponding rebate that reduces the vehicle’s cost by the credit amount.
New Electric Vehicles
To qualify for the full $7,500 new EV tax credit, the vehicle must meet specific minerals sourcing and/or battery components sourcing requirements and its final assembly must be in the U.S. The credit is reduced by half to $3,750 for vehicles that meet only one sourcing criteria. Eligible vehicles must also have a battery capacity of at least 7-kilowatt hours, a gross vehicle weight rating of less than 14,000 pounds and a manufacturer-suggested retail price (MSRP) that does not exceed $55,000 for sedans or $80,000 for SUVs, vans and trucks. Moreover, individuals purchasing the qualifying new EV must have modified adjusted gross income (MAGI) of less than $150,000, or $300,000 for married couples filing joint tax returns. You can use your modified AGI from the year you take delivery of the vehicle or the year before, whichever is less.
Used Electric Vehicles
If you purchase a qualifying used EV or FCV with a sales price of $25,000 or less from a licensed dealer you may be eligible for a tax credit equal to 30 percent of the sale price up to a maximum credit of $4,000. Eligible vehicles must meet the weight and battery capacity of new vehicles, and the model year must be at least two years before the year of purchase. In addition, the credit applies only when your MAGI does not exceed $75,000 for individual taxpayers or $150,000 for married filing jointly.
Claiming the Credit
Effective for the tax year 2024 and beyond, you have the option to claim the EV tax credit on your federal tax returns, or you may transfer it at the time of sale to the seller, provided they are registered dealers. The first option offers a dollar-for-dollar reduction to the income taxes you owe at the end of the year, whereas the second option allows you to reduce the amount you ultimately pay for the vehicle.
About the Author: Scott Montgomery is a director and financial planner with Provenance Wealth Advisors (PWA), an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs and a registered representative with PWA Securities, LLC. He can be reached at the firm’s Ft. Lauderdale, Fla. office at (954) 712-8888 or info@provwealth.com.
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Scott Montgomery is a registered representative of and offers securities through PWA Securities, LLC, Member FINRA/SIPC.
This material is being provided for information purposes only and is not a complete description or a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. There is no guarantee that these statements, opinions or forecasts provided herein will prove correct.
Any opinions are those of the advisors of PWA and not necessarily those of PWA Securities, LLC. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of PWAS, we are not qualified to render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional. Prior to making any investment decision, please consult your financial advisor about your individual situation.
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Posted on April 1, 2025