Buying an electric car is supposed to feel good. You are cutting your gas station visits, you are feeling mildly smug about saving the planet, and you are getting a sweet $7,500 break from the government.
Except, as your cousin who bought a Tesla in 2022 probably discovered, it is not a check. It is a credit. And you only get it if you pick the right car, stay under the income and price limits, and avoid specific battery components from countries on the federal naughty list. Easy.
To make things extra fun, Congress changed the rules again in 2025.
Under the One Big Beautiful Bill, federal EV credits are available only for vehicles acquired on or before September 30, 2025. If you bought or entered into a binding contract and made a payment by that date, the credits still matter for your 2025 return. If you are shopping now, in late 2025, the federal credits are gone, and you are looking at state incentives or dealer discounts instead.
But if you did get in under the wire, here is how the rules work.
The Big Kahuna: New Clean Vehicle Credit (Up to $7,500)
This is the headline credit under Internal Revenue Code section 30D. For qualifying new EVs and fuel cell vehicles, you could get up to $7,500. The credit is split in two:
- $3,750 if the car meets the critical minerals requirements
- $3,750 if it meets the battery components requirements
A car can qualify for one half, both halves, or nothing at all. Whether a specific model qualifies depends on the exact trim and battery and can change over time, so you always have to check the official list on FuelEconomy.gov or the IRS site before you sign anything.
But before you worry about the battery, you have to pass two bigger tests: price and income.
The Price Cap (MSRP)
The Manufacturer’s Suggested Retail Price cannot exceed:
- $80,000 for vans, SUVs, and pickup trucks
- $55,000 for all other vehicles
That is based on MSRP, not what you actually pay after haggling, dealer markups, or discounts.
The Income Cap (Modified AGI)
Your income cannot be too fancy either. To claim the new clean vehicle credit, your modified adjusted gross income (AGI) must be below:
- $300,000 for Married Filing Jointly or a qualifying surviving spouse
- $225,000 for Head of Household
- $150,000 for all other filers
One helpful rule survived all the chaos. You can use the lower of:
- Your AGI for the year you place the car in service, or
- Your AGI for the prior year
So if 2025 was a big income year but 2024 was calmer, you can use 2024 to squeak under the line.
The Best New Rule: “Cash on the Hood”
For years, the credit worked like this: you paid full price for the car, then waited until tax time and hoped you had enough tax liability to use the credit. Helpful, but not exactly thrilling.
Starting January 1, 2024, buyers of qualifying new and used clean vehicles could instead transfer the credit to the dealer at the point of sale.
Here is what that meant in practice:
- You buy a qualifying EV from a registered dealer.
- The dealer confirms eligibility, files a time-of-sale report through IRS Energy Credits Online, and gets the credit from the IRS.
- You get an immediate financial benefit equal to the credit amount, usually as a lower price or down payment.
You still have to file Form 8936 with your tax return and report the credit, even if you took it at the dealership. And there is an important catch:
- If your AGI turns out to be over the limit, you may have to pay the credit back on your tax return.
Two more key points:
- The credit is nonrefundable if you do not transfer it, so it can only reduce your tax to zero, not create a refund by itself.
- You can transfer a clean vehicle credit at the dealer no more than two times per year.
Don’t Forget the Used Cars: The $4,000 Credit
For the rest of us who live in the land of “gently used,” there was the Previously Owned Clean Vehicle Credit under section 25E.
The basics, for vehicles acquired on or before September 30, 2025:
- Credit amount: 30 percent of the sale price, up to $4,000
- Sale price cap: Car must cost $25,000 or less (before the credit)
- Age rule: Model year must be at least two years older than the calendar year you buy it. Buy in 2025, car must be 2023 or older
- Dealer only: Must be purchased from a licensed dealer, not a private seller
- Weight and battery: Under 14,000 pounds, at least 7 kWh battery, plug-in EV or fuel cell
The income limits are lower than for new vehicles:
- $150,000 Married Filing Jointly or surviving spouse
- $112,500 Head of Household
- $75,000 all other filers
You also had to:
- Be at least the second owner
- Buy the car for personal use, not resale
- Not be claimed as someone else’s dependent
- Not have claimed a used clean vehicle credit in the three years before the purchase
And yes, just like with new EVs, you could transfer this credit to the dealer at the point of sale to get an immediate price reduction, as long as the dealer was registered and filed the time-of-sale report.
The September 30, 2025, Cutoff
Here is the part that matters now that we are past that cutoff date. Under the One Big Beautiful Bill:
- The New Clean Vehicle Credit (30D) and the Previously Owned Clean Vehicle Credit (25E) are not allowed for vehicles acquired after September 30, 2025.
- Suppose a vehicle is placed in service after that date. In that case, you can still qualify only if you acquired it on or before September 30, 2025, typically by signing a binding written contract and making a payment before the deadline.
So, if you bought or locked in a car by September 30 and are waiting for delivery, you may still qualify for the credit. If you are deciding whether to buy an EV today in November 2025, there is no longer a federal clean vehicle credit, although automakers and states are trying to fill the gap with their own rebates and discounts.
What You Should Do Now
If you bought or ordered an EV in time:
- Check your AGI against the income limits.
- Confirm the vehicle qualifies on FuelEconomy.gov and the IRS site.
- Make sure your dealer was registered, filed the time-of-sale report, and gave you a copy.
- When you file, attach Form 8936 and keep that report with your records.
If you are only now thinking about an EV, the homework shifts:
- Look at state and local incentives
Watch for dealer or manufacturer discounts that are trying to replace the lost federal credit.
