Signed into law by President Biden in Aug. 2022, the Inflation Reduction Act authorized tax credits for new and used electric vehicles. Although stricter rules have significantly excluded many new EV models and PHEVs (plug-in hybrids) that previously qualified for a maximum $7,500 EV tax credit, plenty of used models still qualify for a maximum credit of $4,000.
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The Clean Vehicle Tax Credit introduced new conditions for EV models to qualify for incentives mandated under Internal Revenue Code Section 25E. Starting in 2023, used EVs — pre-owned all-electric, PHEVs and fuel cell electric vehicles — that are at least two years old have a separate tax credit of up to $4,000 or 30% of the price of the vehicle, whichever is less.
If you’re thinking of buying a used EV, you’ll need to know if you and your used car qualify for a Clean Vehicle Tax Credit.
What Used Cars Qualify for a Clean Vehicle Tax Credit?
A vehicle must meet certain requirements to qualify for federal tax credits. According to Electrek, a used EV must:
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Have a sale price of $25,000 or less.
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Have a model year at least two years earlier than the calendar year when you buy it (for example, a vehicle purchased in 2023 would need a model year of 2021 or older).
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Not have already been transferred to a qualified buyer after August 16, 2022.
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Have a gross vehicle weight rating of less than 14,000 pounds.
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Be an eligible FCV or plug-in EV with a battery capacity of at least 7-kilowatt hours (kWh).
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Be for use primarily in the United States.
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Purchased from a certified dealer (for qualified used EVs, the dealer reports required information to you at the time of sale and to the IRS).
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Be claimed for the tax credit only once in its lifetime.
Who Qualifies for a Used Clean Vehicle Tax Credit?
Per the IRS’s Used Clean Vehicle Credit site, to qualify for the nonrefundable used EV tax credit, you must:
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Be an individual who bought the vehicle for use and not for resale.
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Not be the original owner.
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Not be claimed as a dependent on another person’s tax return.
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Not have claimed another used clean vehicle credit in the 3 years before the purchase date.
Additionally, you must adhere to set income limits. Per the IRS site, your modified adjusted gross income (AGI) may not exceed $150,000 for married filing jointly (or a surviving spouse), $112,500 for heads of households and $75,000 for individual filers.
What Used Models Are Eligible for a Clean Vehicle Tax Credit?
A revised list of used all-electric models and plug-in hybrid EVs that qualify for the full $4,000 tax credit can be checked on the Electrek site or searched on the U.S. Office of Energy Efficiency & Renewable Energy website. However, finding some of them on dealer lots for under $25,000 might be a challenge, given the high sticker prices and interest rates currently aggravating the used car market.