It’s not fanciful to believe that many of us will see the sunset of gas-powered vehicles in our lifetime. At the United Nations Climate Change Conference, major automakers (Ford, General Motors, Mercedes-Benz, Volvo, Jaguar Land Rover, and BYD) signed a pledge to end the sale of gas and diesel-powered cars by 2040, as did thirty countries. Slowly, electric vehicles will become the standard, and EV tax credits and other incentives to purchase them will dwindle or disappear entirely.

Until then, electric vehicle tax credits are one of the most significant benefits of being on the cutting edge of electric vehicle ownership (besides the opportunity to make the right choice for the Earth). Now is the time to get in on those deals; we’re already seeing limitations put in place as more people turn to EV purchases. In 2024, the rules around eligibility became stricter, with manufacturing and income qualifications going into effect.

Let’s take a look at the tax incentives as they stand now, at the federal, state, and local levels – plus how you can supercharge your savings with solar power.

EV Tax Credit: Understanding the Federal Benefits

Effective 2024, tax credit for electric vehicle ownership has become stricter, but there are still plenty of breaks to be had.

In order to qualify, your electric vehicle must be:

• Manufactured in North America
• Purchased for individual use (not for resale)
• Used primarily in the United States

Further, the electric vehicle’s MSRP must be below $55,000 for a sedan, wagon, or hatchback and below $80,000 for an SUV.

From there, the amount you qualify for depends upon two factors:

• You earn $3,750 if at least 60% of the vehicle’s battery components are produced and/or assembled in North America
• You earn the other $3,750 if at least 50% of the critical materials used in the battery are extracted and/or processed in the United States (or one of the U.S.’s free-trade partners)
• Alternatively, the components can be made from materials recycled in North America

This is the most lenient the rules will be; every year, the required percentage of materials produced in North America will increase.

Sound complicated? It can be. But your EV dealership should be your go-to source to navigate these complexities. They will be able to tell you if your vehicle qualifies for tax credits. In fact, you’ll need them to. Beginning this year, electric car tax credits are linked to the Vehicle Identification Number (VIN). Unlike before, where incentives applied broadly to all vehicles of a certain make/model, they're now tied to individual vehicles. For example, if a make/model meets manufacturing requirements on, say, April 8th of 2023, only EVs made after that date are eligible. So even if two EVs look identical on the lot, only one might qualify based on its manufacturing date.

In addition to these manufacturing requirements, the IRS has set income qualifications. To qualify for these tax credits, your modified adjusted gross income (AGI) can’t exceed $300,000 for married couples, $225,000 for heads of households, and $150,000 for all other filing types.

Don’t worry – we come bearing good news, too. First, you won’t have to wait until tax season to see your savings. Instead, the dealership will either reduce the total cost of your loan or apply the tax savings toward your down payment.

Second, while most of the tax credits are directed toward the purchase of new electric cars, used EVs can get in on the savings, too. If you purchase a used EV under $25,000 from a licensed dealer, you may qualify for an electric car tax credit up to 30% of the sale price (this is capped at $4,000).

Third, a loophole allows drivers to collect a refund for leased EVs even if they don’t meet the manufacturing requirements.This is because commercial electric vehicles are exempt from these manufacturing requirements, and the Treasury Department categorizes a leased EV as a commercial vehicle under the Inflation Reduction Act (IRA).

Finally, be sure your dealership is certified to give an EV tax credit; they must be registered on IRS Energy Credits Online in order to qualify.

More reading: How Electric Vehicle Owners Are Defeating Range Anxiety

Which Electric Vehicles Qualify for Tax Credits in 2024?

Though it’s important to confirm with the dealership that you are only looking for electric vehicles that qualify for tax credits in 2024, you can guide your research with this list of EVs that qualify for the full $7,500 tax credit.

The following EVs qualify for full tax credits if they have an MSRP below $55,000 and were placed in service between 01/01/24 and 12/31/24:

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The following EVs qualify for full tax credits if they have an MSRP below $80,000 and were placed in service between 01/01/24 and 12/31/24:

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The following EVs qualify for partial credits if they have an MSRP below $80,000 and were placed in service between 01/01/24 and 12/31/24:

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EV Tax Credit: Understanding State and Local Benefits

State and local benefits are less straightforward than federal benefits because, of course, they vary depending on where you live. Find your state on this handy chart and start reading. Look to see if your state is on this list of states with the best electric vehicle tax incentives.

For state and local benefits, look for incentives related to:

• Newly purchased EVs
• Used EVs
• Leased EVs
• Utility costs
• Charger installation

Be sure not to miss out on tax breaks for utility costs and charger installations because they can be quite lucrative. For example, in Alaska, eligible residents benefit from a $200 bill credit per residential charger. Michigan offers a $500 rebate for the purchase of a Level 2 EV charging station. In Texas, where Tesla is installing Tesla Backup Switch, residents can claim a $500 discount on some solar installations.

More reading: Top Ways to Extend Your Electric Car Battery’s Life

Electric Vehicle Tax Credits: The Bottom Line

The government wants to pay us to switch to electric vehicles, so let’s take advantage of it! The future of the auto industry is electric, so these tax breaks will only last for a limited time. Get in on this inevitability early to benefit the most.

If you’re ready to go one step further, you might even consider investing in solar energy to charge your electric vehicle. Not only is this an eco-conscious option, but the government is currently incentivizing solar energy just like they’re incentivizing electric vehicle ownership. For example, at the federal level, solar electric systems are eligible for tax credits from now until 2034. At the local level, those benefits again vary based on locale.

A final benefit of buying or leasing an electric vehicle? You can take advantage of You.Car, the app designed for EV drivers. Find nearby charging stations, filter based on nearby amenities, and check reviews from fellow drivers. Download the app to get started.