The federal government offers up to $7,500 off a new electric vehicle and up to $4,000 off a used one, both through tax credits established by the Inflation Reduction Act. Many states add their own rebates on top, meaning total government subsidies can exceed $9,000 depending on where you live and what you buy.
The $7,500 Federal Credit for New EVs
The headline number is $7,500, but not every electric car qualifies for the full amount. The credit is split into two halves: $3,750 for meeting critical mineral sourcing requirements and $3,750 for meeting battery component requirements. A vehicle that satisfies only one of those requirements gets half the credit. One that meets neither gets nothing.
These sourcing rules exist to encourage domestic manufacturing. In 2025, at least 60% of the value of critical minerals in the battery must be extracted or processed in the U.S. or a free trade partner country. For battery components, at least 60% of the value must be manufactured or assembled in North America. Those thresholds climb each year, reaching 80% for minerals by 2027 and 100% for components by 2029. As the bar rises, some models may lose eligibility while others gain it as automakers shift their supply chains.
The vehicle itself must also meet a few hard requirements: final assembly in North America, a battery of at least 7 kilowatt hours, and a sticker price that doesn’t exceed $80,000 for SUVs, vans, and pickup trucks or $55,000 for sedans and other vehicles. If the MSRP is even a dollar over those caps, the credit drops to zero.
Income Limits for Buyers
Your income determines whether you can claim the credit at all. The caps are based on modified adjusted gross income:
- Married filing jointly: $300,000
- Head of household: $225,000
- Single or other filers: $150,000
You can use either the year you bought the vehicle or the year before, whichever gives you a lower income. If you exceed the limit in both years, you’re ineligible.
Getting the Discount at the Dealer
You don’t have to wait until tax season to benefit. Registered dealers can apply the credit directly to your purchase price at the point of sale. You transfer your credit to the dealership, and the IRS reimburses the dealer (typically within about 15 days). This effectively turns the tax credit into an instant rebate, which matters if you don’t want to float thousands of dollars for months while waiting to file your return.
Used EV Credit: Up to $4,000
Buying a used electric vehicle from a licensed dealer can qualify you for a separate credit worth 30% of the sale price, up to a maximum of $4,000. The vehicle’s sale price must be $25,000 or less. So if you buy a used EV for $12,000, the credit would be $3,600. At $15,000, you’d hit the $4,000 cap.
This credit has its own, lower income thresholds and applies only to purchases from a dealer, not private sales. It’s aimed squarely at making EVs accessible to buyers who aren’t shopping for new cars.
Commercial Vehicle Credits
Businesses buying electric vehicles for commercial use qualify under a different provision. The credit covers up to $7,500 for vehicles under 14,000 pounds (think delivery vans and company cars) and up to $40,000 for heavier vehicles like electric buses and large trucks. The commercial credit has no MSRP cap and no domestic sourcing requirements, making it significantly easier to claim than the consumer version.
State Rebates That Stack on Top
Several states offer their own incentives that you can combine with the federal credit. New York’s Drive Clean Rebate, for example, provides $500 to $2,000 depending on the vehicle’s electric range and sticker price. Models with more than 200 miles of range qualify for the full $2,000, while those with shorter range or an MSRP above $42,000 receive $500. A New York buyer purchasing a qualifying new EV could combine $7,500 federal plus $2,000 state for $9,500 in total subsidies.
Colorado, California, and several other states run similar programs, some income-targeted to prioritize lower and middle-income households. The amounts and eligibility rules vary widely. Some are instant rebates, others are tax credits, and a few come as post-purchase checks. Checking your state’s energy office or EV incentive database is the fastest way to see what’s available where you live.
What Actually Qualifies in Practice
The list of vehicles eligible for the full $7,500 changes frequently as automakers adjust their battery supply chains to meet the tightening sourcing rules. The IRS maintains a searchable list of qualifying models on its website, updated as manufacturers submit new documentation. Before you commit to a purchase, checking that list is essential, because two trims of the same model can have different eligibility depending on where their batteries are sourced.
Some popular EVs qualify for only $3,750, and others qualify for nothing at all if they’re assembled outside North America or priced above the MSRP caps. The credit is generous in theory, but the qualification maze means the actual subsidy you receive depends on your specific vehicle choice, your income, and your state.