Federal and South Carolina Tax Credits for Electric Vehicles

What tax credits are available for electric vehicle buyers right now

The federal government offers a tax credit of up to $7,500 when you buy a new electric vehicle, and up to $4,000 when you buy a used one. The credit applies to your federal income tax bill for the year you purchase the vehicle. South Carolina does not currently offer a separate state tax credit for electric vehicles, so the federal credit is your main tax benefit.

The federal credit has changed significantly in recent years. The rules about which vehicles may have access to, how much credit you receive, and whether you can claim it have all shifted. Understanding the current rules matters because not every electric vehicle qualifies, and income limits may affect whether you can use the full credit.

The credit is not a rebate at the dealership. You claim it when you file your federal income tax return for the year you bought the vehicle. Some dealerships can transfer the credit to them at the point of sale, which means you get the discount immediately instead of waiting until tax time — but this option is not available everywhere, and not all vehicles may have access to for it.

Key Takeaways

• The federal tax credit for new electric vehicles is up to $7,500, but the amount depends on the vehicle's price, where it was assembled, and your household income.
• Used electric vehicles purchased from a dealer can may have access to for up to $4,000 in federal credit if the vehicle is at least two years old and costs less than $25,000.
• Income limits apply: if your household income exceeds $300,000 (married filing jointly) or $150,000 (single), you cannot claim the new vehicle credit.
• Some dealerships can apply the credit at the time of purchase, but many still require you to claim it on your tax return the following year.
• South Carolina has no state-level electric vehicle tax credit, so the federal credit is your only tax benefit for buying an EV in this state.

New vehicle tax credit: how much you can claim

The credit for a new electric vehicle starts at $7,500, but the actual amount you receive depends on three things: the vehicle's final assembly location, the price of the vehicle, and your household income.

The vehicle must be assembled in North America to may have access to at all. If it was assembled elsewhere, you receive no credit. Among vehicles assembled in North America, the credit is reduced if the vehicle costs more than certain price caps. For sedans, the cap is $55,000. For vans, SUVs, and pickup trucks, the cap is $80,000. If the vehicle's manufacturer's suggested retail price exceeds these amounts, your credit is reduced by $50 for every $1,000 over the cap.

Your household income also limits the credit. If you are married filing jointly, your modified adjusted gross income cannot exceed $300,000. If you are single or head of household, the limit is $150,000. If your income exceeds these thresholds, you cannot claim any new vehicle credit that year.

The credit is also subject to battery component and mineral content requirements that change each year. These rules are technical and vary by vehicle model. The easiest way to check whether a specific vehicle qualifies for the full $7,500, a reduced amount, or nothing at all is to look it up on the Department of Energy's list of may be able to access vehicles at fueleconomy.gov.

Used vehicle tax credit: may be able to access and limits

You can claim up to $4,000 in federal tax credit when you buy a used electric vehicle from a dealer. The vehicle must meet several conditions: it must be at least two years old, it must have been sold by a licensed dealer (not a private seller), and its sale price cannot exceed $25,000.

The used vehicle credit has no income limit, unlike the new vehicle credit. However, your modified adjusted gross income cannot exceed $300,000 (married filing jointly) or $150,000 (single) for a different reason: the credit phases out if your income is above these amounts, meaning you receive less than the full $4,000.

The used vehicle must also have been manufactured at least two years before the date you buy it. If you buy a 2024 model year vehicle in 2024, it does not may have access to because it has not been on the road for two years yet. The vehicle's sale price is the amount you actually paid, not the manufacturer's suggested retail price.

Unlike the new vehicle credit, the used vehicle credit cannot be transferred to the dealer at the point of sale. You must claim it on your federal income tax return for the year you purchased the vehicle.

Point-of-sale credit transfer: getting the discount at the dealership

Some dealerships can apply the federal tax credit directly at the time of purchase, which means you pay less upfront instead of waiting to claim the credit on your tax return. This is called a point-of-sale credit transfer, and it is available only for new vehicles, not used ones.

Not all dealerships participate in this program, and not all vehicles may have access to. The dealership must be registered with the IRS to transfer credits, and the vehicle must meet all the requirements for the full $7,500 credit. If the vehicle qualifies for only a partial credit due to price or assembly location, the dealership can transfer only that reduced amount.

If you use the point-of-sale transfer, you cannot claim the credit again on your tax return. The dealership handles the paperwork with the IRS. If you are unsure whether a dealership offers this option, ask before you finalize your purchase.

How to claim the credit on your tax return

If you did not use a point-of-sale credit transfer, you claim the credit when you file your federal income tax return. You will need Form 8936, which is the IRS form for the electric vehicle tax credit. You can download it from irs.gov or your tax software will guide you through the questions.

To complete the form, you need the vehicle identification number (VIN), the date you bought the vehicle, the sale price, and the name and address of the dealer. You also need to know whether the vehicle was assembled in North America and its battery component and mineral content percentages — but for most vehicles, this information is available on the manufacturer's website or the dealer can provide it.

The credit reduces your federal income tax liability dollar-for-dollar. If you owe $3,000 in federal taxes and you claim a $7,500 credit, your tax bill becomes zero and you receive a $4,500 refund (assuming no other credits or adjustments). If you owe less than the credit amount, you receive the difference as a refund.

Income limits and how they affect your credit

The new vehicle credit has a hard income limit: if your household income exceeds $300,000 (married filing jointly) or $150,000 (single), you cannot claim any credit at all. There is no partial credit if you are just over the limit.

The used vehicle credit works differently. You can claim it even if your income exceeds the threshold, but the credit amount is reduced. The reduction starts at $25 for every $1,000 your income exceeds the limit. This means if you are married filing jointly and your income is $310,000, your $4,000 used vehicle credit is reduced by $250, leaving you with $3,750.

Income for these purposes is your modified adjusted gross income, which is slightly different from your standard adjusted gross income. Your tax software or a tax professional can calculate this for you. If you are close to the income limit, it is worth checking the exact number before you buy.

Vehicles that do not may have access to

Many popular electric vehicles do not may have access to for the full $7,500 credit, and some do not may have access to at all. Common reasons include assembly location, price, or battery component requirements.

For example, some vehicles are assembled outside North America, which disqualifies them entirely. Others are assembled in North America but cost more than the price cap, which reduces the credit. Still others meet the price and assembly requirements but do not meet the battery mineral content threshold for the current year, which also reduces or eliminates the credit.

The rules change each year, and manufacturers adjust their pricing and sourcing in response. A vehicle that may have access to for the full credit last year might may have access to for less this year. The Department of Energy maintains a current list of which vehicles may have access to for how much credit at fueleconomy.gov. Check this list before you buy if the tax credit is important to your decision.

Frequently Asked Questions

Can I claim the credit if I lease an electric vehicle instead of buying one?

No. The federal tax credit applies only to purchases. If you lease, the leasing company may claim a credit, but you cannot. Some leasing companies pass the benefit to you through lower monthly payments, but this is not the same as claiming the credit yourself.

What if I buy the vehicle in December but do not take delivery until January?

The date that matters is when you take delivery of the vehicle, not when you sign the paperwork or pay for it. If you take delivery in January, you claim the credit on your tax return for that year, not the previous year.

Do I have to have owned the vehicle for a certain amount of time to claim the credit?

No. You can claim the credit in the year you purchase the vehicle, regardless of how long you own it afterward. You could sell the vehicle the next month and still claim the credit on that year's tax return.

If I buy a used electric vehicle from a private seller, can I claim the $4,000 credit?

No. The used vehicle credit applies only to vehicles purchased from a licensed dealer. Private sales do not may have access to, even if the vehicle meets all other requirements like age and price.

What happens if the vehicle I bought no longer qualifies for the credit after I purchase it?

The rules that apply are the ones in effect when you purchase the vehicle. If the rules change after you buy it, you can still claim the credit based on the rules that were current at the time of your purchase.