Thinking About Buying an EV in 2024? 7 Reasons the $7,500 Tax Credit Is Worth It
Written by
Angela Mae
Edited by
Carly Brashears
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Ever since they hit the market, electric vehicles have appealed to those looking for a more environmentally-friendly car that doesn’t rely on gasoline to run. But the higher price tag — among other things — has deterred many people from purchasing one of these cars.
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Recently, however, the sales price of EVs has dropped and the gap between EVs and gas-powered vehicles has diminished. The typical EV sold for $53,469 in 2023, whereas the typical new, non-luxury vehicle sold for $48,671.
Along with this, there’s a new tax credit designed to incentivize drivers to switch to electric vehicles. If you qualify, you could get an instant rebate of up to $7,500 for purchasing one of these cars. This could result in a lower monthly payment, help you save money on gas, and more.
If you’re thinking about getting an electric car in 2024, here’s what you need to know about qualifying for the tax credit and why it could be worth it.
What You’ll Need to Qualify for the $7,500 Tax Credit
Before you start seriously shopping around for an electric vehicle, see if you qualify for the tax credit. Whether you do or not, knowing this can help you make a more informed decision as you make your purchase.
According to the IRS, here are the basic requirements to qualify for this tax credit:
- You must purchase a new, clean plug-in electric vehicle or a fuel cell electric vehicle
- You must be purchasing the vehicle for individual or business purposes in the U.S.
- The vehicle must not be for resale purposes
Also, your modified adjusted gross income (AGI) must be no more than:
- $150,000 if filing individually
- $300,00 if filing jointly as a married couple
- $225,000 if you’re the head of household
You can use either your 2023 or your 2024 modified AGI. What this means is that you could still qualify for the tax credit even if your income exceeds the limits in one of these years.
Learn more about the specific vehicles that qualify for this tax credit on the IRS’s website. Or, if you know you qualify, claim the credit by filing Form 8936 with your next tax return.
Why the $7,500 Tax Credit Is Worth It
If you’re thinking about purchasing an EV, here are some of the biggest reasons why the tax credit is worth it.
You Get an Instant Rebate
The tax credit acts as a sort of “instant rebate” for money off an electric vehicle.
The $7,500 tax credit can significantly lower the initial purchase price of an EV,” said John Ellmore, electric vehicle expert and spokesperson for Electric Car Guide. “This reduction makes EVs more affordable and can bring the cost of some electric models closer to their gasoline-powered counterparts.”
As long as the EV is eligible for the tax credit, the IRS will reimburse you for up to $7,500 of the car’s purchase price. This is good news for both cash buyers and those intending to take out an auto loan as it means spending less money.
Business Vehicles May Qualify for a Higher Tax Credit
While personal EVs may only qualify for up to $7,500, business vehicles could be eligible for a much larger credit.
“Businesses should utilize the commercial tax credit, which has far fewer restrictions on price cap or sourcing requirements and offers up to $7,500 for a light vehicle and $40,000 for a larger delivery vehicle,” said Tanya Perrault, chief operating officer at Livingston Energy Group. “There are also many funding options for businesses and municipalities looking to invest in chargers, a must for commercial and fleet electric vehicles.”
You Could Get the Tax Credit on a Used EV
If you can’t quite afford a brand-new EV, you could potentially apply the tax credit to a used or slightly older vehicle. However, qualifying income limits are lower than they are for new vehicles, and the maximum tax credit is $4,000.
“Tax credits are available for leases and for used EVs, so the benefits aren’t restricted to new vehicle purchases,” said Perrault. “There are many well-maintained used EV options on the market that came off a lease with low mileage, so buyers are well-positioned to shop around for the best deal.”
It Doesn’t Matter How Much You Owe in Taxes
You could still qualify for the credit, even if you don’t owe very much in taxes.
“The IRS has waived a confusing rule it enforced previously regarding tax liability,” said Perrault. “Previously, EV buyers would have to owe at least $7,500 to get the full benefit. This year, the IRS is paying out the tax credit to everyone who qualifies, regardless of tax liability.”
Buying an EV Typically Means Long-Term Savings
Although electric vehicles are often initially more expensive than gas-powered vehicles, they usually come with some long-term savings that offset the higher price.
“They have fewer moving parts, which means less wear and tear, and they eliminate the need to purchase gasoline,” said Ellmore. “The tax credit, therefore, not only helps with the initial cost but also introduces buyers to a category of vehicles that can offer ongoing savings.”
You’ll No Longer Need To Worry About the Price of Fuel
The average price of gas nationwide is currently around $3.08. While this is a significant decrease from previous years, the cost of fuel can still add up — especially for commuters or those who drive long distances.
“An EV is a fantastic option for anyone doing a lot of city driving,” said Richard Brauns, senior partner and co-founder of JKR Advertising & Marketing, one of the nation’s largest automotive advertising agencies. “Compare the cost of a tank of fuel versus the cost of electricity to charge an electric vehicle and you clearly see the benefits of EV ownership.”
Plus, driving an EV could be a great alternative to traditional vehicles for those who are concerned about environmental impact.
Many Cities Are Becoming More EV-Friendly
Although an EV might not be the best option if you live in a rural area, they can be cost-effective and convenient in larger cities. Even smaller and mid-sized cities are becoming more EV-friendly.
“As the years go by, the infrastructure is getting better and better, making it far less challenging to find a charging station when it’s needed,” said Brauns.
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