Plug-In Electric Drive Vehicle Tax Credit
Administered by Internal Revenue Service
You can claim a federal tax credit of up to $7,500 when you purchase a new electric or plug-in hybrid vehicle, though the exact amount depends on battery capacity, component sourcing, and vehicle price—sedans must cost $55,000 or less and SUVs/trucks $80,000 or less to qualify. Your income must not exceed $150,000 (single), $225,000 (head of household), or $300,000 (joint filing), and you can transfer the credit to your dealer for an immediate discount at purchase. This credit expires September 30, 2025, so vehicles must be placed in service by that date to qualify.
This program allows qualified vehicle dealers to offer customers an immediate credit at point-of-sale through transfer of the tax credit, improving customer purchasing power and dealership competitiveness. Vehicles must meet final assembly in North America, battery component manufacturing thresholds (50-100% by 2032), and critical mineral sourcing requirements (40-80% by 2032) to maximize the $7,500 credit; non-qualifying vehicles may receive partial credit of $3,750 depending on sourcing compliance. The credit sunsetting on September 30, 2025 creates urgency for sales before that date.
This $7,500 maximum tax credit (adjustable by battery capacity and sourcing compliance) incentivizes domestic battery manufacturing and critical mineral processing through escalating requirements from 2023–2032, with income phase-outs and vehicle price caps limiting eligibility to middle-income purchasers of domestically-assembled vehicles. The program includes a dealer-transfer mechanism allowing instant rebates and phases out after manufacturers sell 200,000 qualifying vehicles, with statutory repeal effective September 30, 2025.
Program details
- Program ID
- 22352
- Effective
- 1/1/2010
- Expires
- 9/30/2025Expired
- Last updated
- 7/25/2025
Eligibility
- Sectors
- commercial industrial residential agricultural
- Technologies
- passenger electric vehicles plug-in electric hybrid vehicles
Program summary
Note: Section 70502 of The One Big Beautiful Bill (OBBB) repealed this tax credit for equipment placed in service after September 30, 2025.
Vehicles placed into service prior to January 1, 2023:
The federal government provides a tax credit for the purchase of a new all electric or plug-in hybrid electric vehicle. To qualify, the vehicle must be made by a manufacturer, have a gross vehicle weight rating of not more than 14,000 pounds, and be propelled to a significant extent by an electric motor which draws electricity from a battery which has a capacity of at least 4 kilowatt-hours (kWh) and is capable of being recharged from an external source.
The credit has a base value of $2,500, and an additional value based on the capacity of the battery. The capacity-based credit is $417 for each kWh of capacity in excess of 4 kWh, up to a combined maximum tax credit of $7,500. The credit will begin to be phased out for each manufacturer in the second quarter following the calendar quarter in which a minimum of 200,000 qualified vehicles have been sold by that manufacturer for use in the United States.
Vehicles placed into service after December 31, 2022 and before September 30, 2025:
Qualifying electric vehicles can receive a total tax credit of $7,500 if certain component sourcing requirements are met; $3,750 for critical minerals and $3,750 for battery components. Additionally, the final assembly of vehicles must take place in North America to be eligible, and beginning in 2025 no percentage of the material used in the vehicle’s battery can be extracted or processed in or by an entity of foreign concern as defined in 42 USC 18741 (a)(5).
To be eligible, sedans must have a manufacturer’s suggested retail price of $55,000 or less; and vans, SUV, and pick-up trucks must have a manufacturer’s suggested retail price of $80,000 or less. The credit is not available for taxpayers with a modified adjusted gross income exceeding: $300,000 for a joint filing, $225,000 for a head of household, or $150,000 for a single filing.
Qualifying electric vehicles can receive a tax credit of $3,750 if their batteries meet the percentages specified below for 1) critical minerals being extracted and processed in the United States or another country with which the United States has a free trade agreement, or 2) being recycled in North America.
- 2023: 40%
- 2024: 50%
- 2025: 60%
- 2026: 70%
- 2027-2032: 80%
Qualifying electric vehicles can receive an additional tax credit of $3,750 for meeting the percentages specified below for battery components being manufactured and assembled in North America.
- 2023: 50%
- 2024-2025: 60%
- 2026: 70%
- 2027: 80%
- 2028: 90%
- 2028-2032: 100%
The Inflation Reduction Act also established a process through which the vehicle purchaser can transfer the credit to the dealer in exchange for either cash or a partial payment or down payment for the purchase of the vehicle.
Contact & resources
- Additional resources
Please verify current program details with the administering agency before making any financial decisions.
