Clean Vehicle Tax Credit: What You Need to Know for Used EVs

Let’s Breakdown the Clean Vehicle Tax Credit for Used EVs

6 min read

By • March 20, 2024

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Starting January 1, 2023, there is a new perk for those eyeing a qualified and used electric vehicle (EV) from a licensed dealer for $25,000 or less. if you are eligible, you could be in line for the Clean Vehicle Tax Credit for used EVs. Here is a breakdown of what you need to know:

How It Works

The Clean Vehicle Tax Credit tax credit gives you 30% of the sale price back, up to a maximum credit of $4,000. Although it is important to remember that it the credit can only offset what you owe in taxes for the year. Any extra credit cannot be carried over to future tax years.

Qualifying Criteria

To be eligible, you need to be an individual purchasing the EV for personal use, and you can’t be the original owner. Plus, you cannot have claimed another used Clean Vehicle Tax Credit in the past 3 years. Income-wise, you need to keep your modified adjusted gross income (AGI) under certain thresholds, which will vary depending on your filing status. Specifically, your modified adjusted gross income (AGI) must not surpass certain thresholds.

Here is a breakdown: First, married individuals filing jointly or surviving spouses, the limit stands at $150,000. Second, heads of households must keep their AGI under $112,500. Third, other filers is under $75,000. You can use your modified AGI from either the year of EV delivery or the preceding year, whichever is lower. If your income falls below the threshold for at least one of these two years, you are eligible to claim the credit.

Furthermore, in order for a sale to qualify for certain benefits, specific criteria must be met: Firstly, the EV must be purchased from a licensed dealer authorized to sell motor EVs within various jurisdictions, including states, the District of Columbia, Puerto Rico, other U.S. territories, as well as Indian tribal governments and Alaska Native Corporations.

If you are eyeing a used EV that is eligible, the dealer must provide certain information both to the buyer at the time of sale and to the Internal Revenue Service (IRS). This includes the dealer’s name and taxpayer ID number, the buyer’s name and taxpayer ID number, the date and price of the sale, the maximum credit allowable under IRC 25E, the vehicle identification number (VIN), unless the EV does not possess one, and details regarding the battery capacity of the EV. Following these requirements guarantees transparency and compliance with regulations, which will benefit you and the dealer.

The list of used cars qualified for claiming the tax credit includes Tesla Roadster, Kia EV 6, Porsche Taycan, Rivian R1S, and many more. See here for a list of used eligible EVs.

EV Requirements

Not every used EV qualifies for this credit. Your chosen EV must meet certain criteria, including having a sale price of $25,000 or less and being at least two years older than the calendar year you buy it. It also must not have been transferred to a qualified buyer after August 16, 2022. In addition, it needs to be an eligible plug-in EV with a battery capacity of at least 7-kilowatt hours and must weigh less than 14,000 pounds.

How to Claim

Ready to claim the credit? Complete Form 8936 when filing your taxes for the year you purchased the EV, making sure to include the VIN. This form will help you claim your used Clean Vehicle Tax Credit and put some extra money back in your pocket.

If you are on the hunt for an eco-friendly ride without breaking the bank, keep an eye out for those eligible used EVs. With the Clean Vehicle Tax Credit, you can drive confidently knowing you have saved money and the environment.

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