What Are the Income Limits for the $7500 EV Tax Credit?

Learn about income limits and other requirements for claiming an electric vehicle tax credit in 2021.

What Are the Income Limits for the $7500 EV Tax Credit?

The electric vehicle tax credit is a non-refundable tax credit offered to taxpayers who purchase qualifying electric vehicles or plug-in hybrid vehicles. To be eligible, you must ensure that the car you buy qualifies, that your income meets the requirements, and that your tax status allows you to benefit from the credit before buying a vehicle. The amount you qualify for is based both on your income tax and on various specifications of the electric vehicle you buy, including where it's manufactured. The electric vehicle must have a 7 kWh battery and can be recharged from an external source of electricity.

To qualify for the new electric vehicle tax credit, your income must be below certain thresholds and the vehicle you intend to buy must also meet several IRS specifications, including price limits and manufacturing guidelines. Manufacturers can use the contact form on the website to request changes to this list of vehicles. For more information, see the details of the manufacturers. Recently, the United States Department of the Treasury finally published its guide on batteries for electric vehicles that meet the requirements.

This is the last one. After a review by the IRS, the United States Department of the Treasury delayed its battery guide relating to what electric vehicle manufacturers should build in the U. S. Department of State so that your vehicles meet the requirements. Instead, you apply for the credit by filing your federal income tax return using Form 8936, Qualified Credit for Motor Vehicles with Plug-In Electric Drives. Frequently asked questions about the initial changes of the Inflation Reduction Act to the tax credit for electric vehicles can be found online.

One of the most controversial issues with the previous version of the electric vehicle tax credit was the exclusion of used cars. While electric vehicles assembled outside North America, for example in Europe or Korea, are not eligible for credit if purchased, they can be if rented. If you've looked at all these details and want to take advantage of this opportunity, make sure you understand all of these requirements before buying an electric vehicle. The credits apply to plug-in electric vehicles, including plug-in hybrid electric vehicles and battery electric vehicles (BEV). Just because a car has a battery doesn't mean it qualifies for the federal electric car tax credit.