Federal Electric Vehicle Incentives

The mission of Clean Cities and Communities is to foster the economic, environmental, and energy security of the United States by working locally to advance affordable, domestic transportation fuels and technologies. Nearly 100 volunteer coalitions carry out this mission by developing public/private partnerships to promote alternative and renewable fuels, idle-reduction measures, fuel economy, improvements, and emerging transportation technologies. Clean Cities and Communities provides information about funding opportunities, coordinates technical assistance projects, updates and maintains databases and websites, and publishes technical and informational materials. For more information, see the Clean Cities and Communities website.

Clean Agriculture is a voluntary program that promotes the reduction of diesel exhaust emissions from agricultural equipment and vehicles by encouraging proper operations and maintenance by farmers, ranchers, and agribusinesses, use of emissions-reducing technologies, and use of cleaner fuels.

Clean Construction and Clean Agriculture are part of the U.S. Environmental Protection Agency’s Diesel Emissions Reduction Act (DERA) Program, which offers funding for clean diesel construction and agricultural equipment projects.

For more information, see the Reducing Diesel Emissions from Construction and Agriculture website.

Electric Vehicle (EV) and Fuel Cell Electric Vehicle (FCEV) Tax Credit

The Inflation Reduction Act of 2022 (Public Law 117-169) amended the Qualified Plug-in Electric Drive Motor Vehicle Credit (IRC 30D), now known as the Clean Vehicle Credit, and added a new requirement for final assembly in North America that took effect on August 17, 2022. Additional requirements apply for vehicles placed in service (delivered) on or after January 1, 2023, and the amount of the credit will depend on whether the vehicle meets new critical minerals and battery components requirements for vehicles placed in service after April 17, 2023. See the IRS Clean Vehicle Credit and final guidance for more information. Taxpayers who purchase an eligible vehicle may qualify for a tax credit of up to $7,500. Additional details are provided below based on when the vehicle is purchased or placed-in-service.

Vehicles Placed in Service on or After April 18, 2023

For vehicles delivered on or after April 18, 2023, limitations apply that went into effect January 1, 2023, related to the vehicle’s manufacturer’s suggested retail price (MSRP), the buyer’s modified adjusted gross income, and the vehicle’s battery capacity. A North American final assembly requirement applies for vehicles purchased on or after August 17, 2022. Additional critical mineral and battery component requirements also apply as of April 18, 2023, which alter how the tax credit is calculated and may alter the amount of the tax credit available. These latter requirements came into effect upon the publication of the Treasury Department’s guidance document regarding the critical mineral and battery component requirements. Vehicles that meet the critical mineral requirements are eligible for a $3,750 tax credit, and vehicles that meet the battery component requirements are eligible for a $3,750 tax credit. Vehicles meeting both the critical mineral and the battery component requirements are eligible for a total tax credit of $7,500.

Vans, sport utility vehicles, and pickup trucks must not have an MSRP above $80,000, and all other vehicles may not have an MSRP above $55,000. The MSRP can be found on the vehicle’s window sticker, which is also known as the “Monroney label”; the MSRP for this purpose includes any trim, options, or accessories for the particular vehicle and excludes the destination fee and dealer-provided options and accessories.

Additionally, a taxpayer’s eligibility for the tax credit may be limited by thresholds for modified adjusted gross income (modified AGI); only individuals having a modified AGI below the following thresholds for the current tax year or the prior tax year are eligible for the tax credit:

• $300,000 for joint filers
• $225,000 for head-of-household filers
• $150,000 for all other filers

To be eligible for the Clean Vehicle Credit, the battery powering the vehicle must have a capacity of at least seven kilowatt-hours (kWh). The amount of the credit depends on whether the vehicle meets certain critical minerals and battery component requirements.

Critical Minerals: To be eligible for the $3,750 critical minerals portion of the tax credit, the percentage of the value of the battery’s critical minerals that are extracted or processed in the United States or a U.S. free-trade agreement partner or recycled in North America, must meet or exceed the following thresholds:

Battery Components: To be eligible for the $3,750 battery components portion of the tax credit, the percentage of the value of the battery’s components that are manufactured or assembled in North America must meet or exceed the following thresholds:

Further guidance on additional 30D requirements is forthcoming. For more information, including additional eligibility requirements, see the IRS Clean Vehicle Credit website.

Vehicles Sold on or After January 1 and Placed-in-Service Before April 18, 2023

Beginning January 1, 2023, the Clean Vehicle Credit (CVC) provisions removed the manufacturer sales caps for vehicles sold after January 1, 2023, expanded the scope of eligible vehicles to include both EVs and FCEVs, and required that the battery powering the vehicle has a capacity of at least seven kilowatt-hours (kWh). An available tax credit under the CVC may be limited by the vehicle’s manufacturer suggested retail price (MSRP) and the buyer’s modified adjusted gross income (as addressed above). The North American final assembly requirement continues to apply.

For vehicles placed in service before April 18, 2023, the available CVC tax credit is a base amount of $2,500 plus, for a vehicle that draws propulsion energy from a battery with at least 7 kWh of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kWh. The total tax credit available for a vehicle may not exceed $7,500.

Vehicles Purchased Between August 17 and December 31, 2022

Qualifying EVs purchased and delivered between August 17, 2022, and December 31, 2022, are eligible for the tax incentive as described below for vehicles purchased before August 17, 2022, but are limited to vehicles with final assembly in North America. Manufacturer sales caps on vehicles apply. Note that for some manufacturers, the assembly location may vary because some models are produced in multiple locations. The assembly location of a particular vehicle should be confirmed by referring to its Vehicle Identification Number (VIN) using the U.S. Department of Transportation’s VIN decoder or an information label affixed to the vehicle.

Vehicles Purchased Before August 17, 2022

Qualifying EVs purchased before August 17, 2022, are eligible for a tax credit that is available for the purchase of a new qualified EV that draws propulsion from a battery that has at least five kilowatt-hours (kWh) of capacity, uses an external source of energy to charge the battery, has a gross vehicle weight rating of up to 14,000 pounds, and meets specified emission standards. The minimum credit amount is $2,500, and the credit may be up to $7,500 based on each vehicle’s traction battery capacity. 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 PEVs have been sold by that manufacturer for use in the United States. This tax credit is also available for future EV owners with a written binding contract to purchase a new qualifying electric vehicle before August 16, 2022, but do not take possession of the vehicle until on or after August 16, 2022. For more information, including qualifying vehicles and sales by manufacturer, see the IRS Clean Vehicle Credit website.

(Reference Public Law 117-169 and 26 U.S. Code 30D)

For alternative fuel vehicle (AFV) infrastructure placed in service prior to January 1, 2023, see the Pre-2023 Alternative Fuel Infrastructure Tax Credit entry.

Installations Beginning January 1, 2023

The Alternative Fuel Vehicle Refueling Property Credit is available for qualified AFV fueling property installed in qualified locations on or after January 1, 2023, and through December 31, 2032. A single item of 30C property is each charging port or fuel dispenser, as well as each energy storage property for electricity, hydrogen, natural gas, propane, E85, or biodiesel blends of at least 20% (B20+). Components and parts that are essential to the operation of the charging port or fuel dispenser, including labor costs for constructing and installing the property, are also eligible for the 30C credit. Businesses are eligible for a tax credit of:

• 6% of the depreciable costs, up to $100,000 per item; or,
• 30% of the depreciable costs, up to $100,000 per item, if the installation meets U.S. Department of Labor prevailing wage and apprenticeship requirements.

For more information, see the Alternative Fuel Vehicle Refueling Property Credit proposed rule.

Tax exempt entities, including state and local governments, may be eligible to receive this credit in the same amount as businesses, via IRS elective pay provisions. For elective pay eligibility requirements, please see the IRS Elective Pay and Transferability website.

Consumers who purchase qualified alternative fueling equipment for installation at their principal residence in qualified locations on or after January 1, 2023, and through December 31, 2032, may receive a tax credit of up to 30% of the cost, up to $1,000.

To be eligible, all qualified fueling equipment also must be installed in a population census tract that is a low-income community or not an urban area. To help determine if an installation location is in a qualified census tract, see the IRS Guidance on the Qualified Alternative Fuel Vehicle Refueling Property Credit and Argonne National Laboratory’s 30C Tax Credit Eligibility Locator tool and list of frequently asked questions.

Additional requirements may apply. For further details, see the IRS Inflation Reduction Act of 2022 website and IRS Form 8911, which is available on the IRS Forms and Publications website. Additional location eligibility information is available in the IRS Guidance on Satisfying the Geographical Requirements of the Section 30C Alternative Fuel Vehicle Refueling Property Credit. For more information, including frequently asked questions and an eligibility locator map, see the Argonne National Laboratory Refueling Infrastructure Tax Credit website.

(Reference 26 U.S. Code 30C, 30D, 38, and 6417 and Public Law 117-169)

Beginning January 1, 2023, the Clean Vehicle Credit (IRC 25E) provides a tax credit of up to $4,000 for the purchase of a pre-owned EV or FCEV. Eligible vehicles must be of a model year at least two years prior to the year of purchase and may not have a purchase price above $25,000. Individuals with a gross annual income below the following thresholds are eligible for the tax credit:

• $150,000 for joint filers

• $112,500 for head-of-household filers

• $75,000 for single filers

Only one tax credit may be claimed per vehicle. Individuals may not claim more than one pre-owned vehicle tax credit in a three-year period. For more information about claiming the credit, see Internal Revenue Service (IRS) Used Vehicle Credit website and Form 8936, which is available on the IRS Forms and Publications website, and the final rule.

(Reference Public Law 117-169 and 26 U.S. Code 25E)

Fueling equipment for natural gas, propane, liquefied hydrogen, electricity, E85, or diesel fuel blends containing a minimum of 20% biodiesel installed through December 31, 2022, is eligible for a tax credit of 30% of the cost, not to exceed $30,000. Permitting and inspection fees are not included in covered expenses. Fueling station owners who install qualified equipment at multiple sites are allowed to use the credit towards each location. Unused credits that qualify as general business tax credits, as defined by the Internal Revenue Service (IRS), may be carried backward one year and carried forward 20 years.

For more information about claiming the credit, see IRS Form 8911, which is available on the IRS Forms and Publications website.

For information on the Alternative Fuel Infrastructure Tax Credit for installations beginning January 1, 2023, see the Alternative Fuel Infrastructure Tax Credit.