Electric driving is not just for climate-conscious car buyers. According to EDERIAN, the EV market has experienced dramatic growth over the past few years, with over 8.7% of new retail registrations from EV buyers in 2024.
At the same time, electric vehicle options continue to diversify, including a wide range of styles, funding options and price ranges. Operating electricity comes with perks that save you a lot of money. The obvious – In addition to saving on gas costs, there is currently an electric vehicle tax credit for those who buy electric vehicles. Depending on your hometown, owning an electric vehicle can save thousands of money.
However, the battery procurement requirements now take effect, which means fewer EV vehicles are eligible for these benefits. Additionally, EV credits could be abolished under the Trump administration. This can take time as Congressional approval is required, so EV shoppers may want to use credit as much as possible.
What is the EV Tax Credit?
EV tax credits are financial incentives built by the government to encourage drivers to purchase electric vehicles. As Liz Najman, director of Market Insights at Recurrent Auto, explained, “EV tax credits have been around for a while and were reinvigorated in 2023 with the Inflation Reduction Act.
This incentive is a tax credit worth up to $7,500 that you qualify for, rather than a check you receive via email after purchasing the vehicle. This credit applies to all electrical, plug-in, and fuel cell vehicles that meet the requirements, but certain credit amounts are available on the IRS website IRS.Gov.
EV tax credit was used
Drivers who may not be able to afford a brand new EV can still benefit from the tax credit. When you purchase a used electric vehicle up to $25,000, your driver will receive a tax credit of up to 30% of the purchase price.
Once you find a used car that meets these requirements, you can use credits for the amounts you pay or charge when you file your tax return. However, we recommend using a tax credit as a down payment for your vehicle. A bigger down payment can dramatically reduce your monthly car payments, and with more EVs in the market, you can walk away in large quantities.
“The number of eligible vehicles is rising sharply,” says Najman. “If you look at the vehicle under that $25,000 price threshold, there’s so much availability,” she shares.
For example, the 2022 Kia Niro EV averages just under $23,000, and with credit you can buy it for under $20,000.
Unfortunately, not all states offer EV tax credits and incentives. In fact, more than half of the states in the country do not have EV tax credit programs. So, before you buy a garage charging station, decide how much you can save in your hometown state.
What’s new for 2025?
The Trump administration plans to eliminate EV tax credits, but the move requires approval from Congress. Despite the threat of exclusion, Najman is still seeing momentum in the market, predicting sales will continue to grow even without incentives.
“Only 25% of new EV purchases were subject to a federal tax credit,” she says. “In other words, 75% of new EV buyers would have bought it anyway.”
She also pointed out the possibility of repeating EV buyers, saying, “A recent survey shows that it’s well over 90% of drivers who have made an electrical plan to maintain electricity. In 2025 alone, there are at least 120,000 EV drivers who trade on leases.
The future of clean vehicle tax credits may be in the air, but they are still available today. That’s a good thing. Given that tariffs imposed by the new administration will make EVs, many new gas-powered used cars more expensive.
EV shoppers can redeem credits at the dealer’s point of sale, not when they file taxes. Najman recommends using credits at the point of sale. “When used as year-end tax credits, these incentives are non-refundable and therefore can only be charged as much as the value of your tax liability,” she says.
If you want to use credits at a dealer, you will need to work with something registered with the IRS for that type of transfer. It shouldn’t be too difficult to find in your area where you can facilitate a seamless credit reimbursement process. More than 9,500 dealers are registered with the IRS, according to the Department of Energy.
EV Tax Credit Requirements
The EV tax credit encourages drivers to buy an EV, but not all types of drivers or vehicles will result in a tax credit. Think about the requirements you and your future vehicle must have before securing an auto loan for your EV purchase.
Vehicle cost
It has been suggested that for a vehicle to qualify for a tax credit, its retail price (MSRP) must be less than a certain amount depending on the vehicle.
- For used cars, it’s under $25,000.
- Under $80,000 for new vans, sports utility vehicles and pickup trucks.
- For other newer vehicles, it’s under $55,000.
Vehicle age
Depending on the age of your electric or hybrid vehicle, certain specifications must be met to qualify for the available incentives.
income
Your car isn’t the only one who needs to qualify for a tax credit. So does your income. To qualify for a tax credit, the revised adjusted gross income is as follows:
- For married couples or surviving spouses jointly filed, it is less than $300,000.
- Head of household is under $225,000.
- Under $150,000 for all other filers.
EV tax credits based on vehicle brand
Which vehicle will qualify? Before you shop, check out the 2025 model where you can earn a full tax credit and compare options. The following vehicles will be eligible for a $7,500 tax credit as long as they are served January 1st to December 31st, 2025.
Don’t forget that the maximum MSRP for all vehicles is $80,000 to qualify for credit. Therefore, some trims on these models may not qualify.
State tax credits and incentives
Before deciding to buy an electric vehicle, check out the incentives available in your state. In California, incentives may be available only in certain counties.
Conclusion
If you have time to buy a new set of wheels, consider buying a new or used electric vehicle to deal with climate change and benefit from EV tax credits and incentives. Before deciding on a particular EV, do your homework and investigate whether there are still tax credits available.
It is also important to check the availability of charging stations in your area, and depending on how you use your vehicle, check the battery range of your EV of your interest.
When it’s time to find funds and insurance, compare the fees and different costs to buy an EV than a traditional EV.
