Is there a tax credit for purchasing an electric vehicle in 2025?

by | May 9, 2025 | Individual Taxes, Tax Credits

Here’s what HIVE AI had to say about “Is there a tax credit for purchasing an electric vehicle in 2025?”:

Tax Credits for Electric Vehicles in 2025

Yes, there is a tax credit available for purchasing an electric vehicle in 2025. The Clean Vehicle Credit (Section 30D) provides up to $7,500 for new electric vehicles, though qualifying for the full amount depends on meeting specific battery component and critical minerals requirements.

Maximum Credit Amount

For 2025, the maximum Clean Vehicle Credit remains at $7,500 per vehicle, consisting of two components:

  • $3,750 if certain critical minerals requirements are met
  • $3,750 if certain battery components requirements are met Section 30D provides a credit for new clean vehicles that are placed in service by the taxpayer during the taxable year, worth a maximum credit of $7,500 per vehicle, consisting of $3,750 if certain critical minerals requirements are met and $3,750 if certain battery components requirements are met. IRS Newsroom – IR-2023-228

New Foreign Entity Restrictions for 2025

A significant change for 2025 involves stricter requirements regarding foreign entities of concern (FEOC):

Under the excluded entity restriction, in order to be eligible for the section 30D credit, vehicles placed in service beginning in 2024 must not have batteries containing battery components manufactured or assembled by a FEOC. In addition, vehicles placed in service beginning in 2025 must have not batteries containing applicable critical minerals extracted, processed, or recycled by a FEOC. IRS Newsroom – IR-2023-228

This means that for 2025, electric vehicles must meet both of these requirements to qualify for the credit:

  • No battery components manufactured or assembled by a foreign entity of concern
  • No critical minerals extracted, processed, or recycled by a foreign entity of concern

Price Limitations

The credit is only available for vehicles under certain price thresholds:

Section 30D(f)(11)(A) provides that no credit is allowed for a vehicle with a manufacturer’s suggested retail price in excess of the applicable limitation. Section 30D(f)(11)(B) provides that the applicable limitation for each vehicle classification is as follows: in the case of a van, a sport utility vehicle, or a pickup truck, $80,000; and in the case of any other vehicle, $55,000. Rev. Proc. 2022-42

Income Limitations

While not specifically mentioned in the provided documents for 2025, it’s important to note that income limitations apply to this credit. Based on current rules, these limitations are likely to continue in 2025.

Dealer Requirements

To qualify for the credit, the dealer must provide specific information about the vehicle:

At the time of sale, a seller must give you information about your vehicle’s qualifications. Sellers must also register online and report the same information to the IRS. If they don’t, your vehicle won’t be eligible for the credit. IRS – Clean vehicle tax credits

Alternative: Used Clean Vehicle Credit

If you’re considering a used electric vehicle instead of a new one, there’s a separate credit available:

Section 13402 of the IRA added § 25E to the Code, which is generally effective for vehicles acquired after December 31, 2022, and before January 1, 2033 (except the election to transfer of the credit to an eligible entity is effective for vehicles acquired after December 31, 2023). Section 25E(a) provides that in the case of a qualified buyer who during a taxable year places in service a previously-owned clean vehicle, an income tax credit is allowed for the taxable year equal to the lesser of (1) $4,000, or (2) the amount equal to 30 percent of the sale price with respect to such vehicle (that is, the § 25E credit). Rev. Proc. 2022-42

In the case of a qualified buyer who during a taxable year places in service a previously-owned clean vehicle, there shall be allowed as a credit against the tax imposed by this chapter for the taxable year an amount equal to the lesser of— (1) $4,000, or (2) the amount equal to 30 percent of the sale price with respect to such vehicle. IRC § 25E(a)

Electric Vehicle Charger Credit

In addition to the vehicle credit, you may also qualify for a credit for installing an electric vehicle charger:

For consumers who purchase and install an electric vehicle charger for their principal residence, the tax credit equals 30% of the cost, up to a maximum credit of $1,000 per charging port. This includes labor and certain associated property that is directly attributable and traceable to a charger, such as a pedestal directly supporting a charging port. IRS – Publication 6027: Individuals, Electric Vehicle Chargers, and the Alternative Fuel Vehicle Refueling Property Credit

Conclusion

For 2025, the Clean Vehicle Credit continues to offer significant tax benefits for electric vehicle purchasers, with a maximum credit of $7,500 for new vehicles. However, the stricter requirements regarding foreign entities of concern that take effect in 2025 may limit which vehicles qualify for the full credit. Before purchasing, it’s advisable to verify that your chosen vehicle meets all requirements, including battery component and critical minerals sourcing, price limitations, and dealer reporting requirements.

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