The electric vehicle industry has been constantly growing, with no signs of slowing down. Automakers are electrifying large portions of their fleets, and Detroit-based General Motors has has committed to an all-electric fleet by 2040.

Helping to boost EV sales is the Inflation Reduction Act, legislation passed in 2022 that includes financial incentives for the purchase of an electric vehicle. Americans may be eligible for a tax credit of up to $7,500 for the purchase of an eligible EV. In addition, some states, and in some cases utility companies, have followed suit, offering incentives for those willing to make the switch to an electric vehicle or plug-in hybrid.

Who is eligible for an EV tax credit?

Eligibility depends on income and how you plan to use the vehicle. To claim a credit, a single taxpayer must make no more than $150,000 in modified adjusted gross income. The limit for couples filing jointly is $300,000, and heads of household must have an AGI of $225,000 or less to qualify.

Tax credits are available only on purchases for personal use, not resale, and the vehicle must be used primarily in the U.S.

Currently, the incentive for an EV purchase is offered only as a tax credit, meaning a taxpayer would receive the full $7,500 credit only if they paid at least $7,500 in taxes to the federal government. If a taxpayer paid only $4,000 in taxes but was eligible for the full $7,500 credit, they would receive only a $4,000 credit.

Beginning in 2024, EV buyers will be able to transfer the EV credit to the dealer at the point of sale. That will directly reduce the price of the vehicle by the full credit amount, meaning that if a taxpayer is eligible for a $7,500 credit, the vehicle will be discounted by $7,500. For now, tax credits can be claimed by filling out the Form 8936 when filing federal taxes.

Learn more: Should I buy an EV? Your buying guide on big discounts, tax credits and when to buy.

Which EVs are eligible for a tax credit?

To claim the full $7,500 tax credit, battery components used in an EV must be manufactured or assembled in North America, and crucial minerals in the battery must be sourced from the United States or a country with which the U.S. has a free-trade agreement, or recycled in North America.

If an EV meets only the battery component requirement, it is eligible for a $3,750 credit. Conversely, if an EV meets only the critical minerals requirement, it is eligible for a $3,750 credit. Only when both criteria are met is the vehicle eligible for the full $7,500 tax credit. For vehicles purchased before April 18, 2023, the criteria is different. If you've purchased a vehicle before that date, find out if you are eligible for the tax credit using this IRS tool.

Used electric vehicles are included in the incentives, but the maximum tax credit is $4,000

For eligible used EVs, the maximum purchase price on the vehicle must be $25,000 or less. Claiming your tax credit on a used EV is also not a guarantee. A used electric vehicle is eligible for a tax credit only if the vehicle did not have a tax credit claimed on it when it was purchased as a new EV. To find out if your used EV qualifies for a tax credit and how much you may be eligible to receive, check using the Department of Energy's tool.

Does your state offer incentives on EV purchases?

Search for your state in the list below to find out what incentives are available when you purchase an electric vehicle, plug-in hybrid or electric motorcycle.

It isn't just vehicles that are eligible for incentives. The federal government, most state governments and many utility companies offer rebates for the installation of an electric vehicle charger. Find out for which rebates you qualify using the Department of Energy's tool and clicking on your state.