The Inflation Reduction Act restructured the federal EV credit (Section 30D) starting tax year 2024 with three big shifts: an income cap, an MSRP cap, and battery sourcing requirements. It also added Section 25E, a new used-EV credit worth up to $4,000.
The income test
Modified Adjusted Gross Income (MAGI) caps for the new-vehicle credit: $150,000 single, $225,000 head of household, $300,000 married filing jointly. Used credit caps are half. You may use either the year-of-purchase or prior-year MAGI — whichever is lower.
The MSRP test
$55,000 for cars; $80,000 for SUVs, trucks, and vans. The vehicle's classification per the IRS list controls — not the dealer's marketing label. Used-vehicle credit is capped at $25,000 purchase price.
Sourcing tests
Two halves of $3,750 each: critical minerals from approved trade partners (or recycled in North America), and battery components manufactured/assembled in North America. Vehicles meeting only one half qualify for $3,750 instead of $7,500.
Point-of-sale transfer
Starting January 2024, you may transfer the credit to a registered dealer at the time of purchase, which converts it to an immediate price reduction. Income test still applies — if you were ineligible at year-end, you'd owe the IRS the credit amount back.
Used credit (Section 25E)
$4,000 or 30% of the sale price, whichever is less. Vehicle must be at least 2 model years old, sold by a dealer (not private), purchase price ≤ $25,000, weight under 14,000 lb. Income caps: $75k / $112.5k / $150k.
Frequently asked questions
Is the EV tax credit refundable?
Section 30D is non-refundable as a tax credit, but starting 2024 you may transfer it to the dealer at point of sale, which converts it into an immediate price reduction regardless of your tax liability.
What if my vehicle does not pass the sourcing test?
You may still qualify for a partial credit ($3,750) if either the critical-minerals or battery-components requirement is met but not both.