The federal electric vehicle (EV) tax credit offers up to $7,500 in savings for buyers of qualifying EVs, but not everyone is eligible. The EV tax credit 2024 income limit is one of the key factors determining whether a taxpayer can claim this incentive.
Many high-income individuals assume they won’t qualify, but with proper planning, it may still be possible to take advantage of the credit. Additionally, there are alternative incentives available for those who exceed the income thresholds.
This guide explains the income limits for the 2024 EV tax credit, strategies for qualifying, additional eligibility requirements, and alternative incentives for high-income earners.
What is the EV Tax Credit 2024 Income Limit?
To claim the federal EV tax credit, taxpayers must have a modified adjusted gross income (MAGI) below the IRS limits for 2024:
- $150,000 for single filers
- $225,000 for heads of household
- $300,000 for married couples filing jointly
If a taxpayer’s MAGI exceeds these limits, they cannot claim the EV tax credit, even if the vehicle qualifies. However, the IRS allows taxpayers to use the lower of their MAGI from either the current tax year or the prior year. This means someone who exceeds the income limit in one year may still qualify if their income was lower the previous year.
MAGI is calculated by taking adjusted gross income (AGI) and adding back certain deductions, such as foreign-earned income exclusions and tax-exempt interest. Because AGI can fluctuate due to bonuses, stock sales, and business income, reviewing MAGI carefully before purchasing an EV is essential.
How to Qualify for the EV Tax Credit if You Are Near the Income Limit
Some high-income taxpayers may still be able to qualify for the EV tax credit by managing their MAGI strategically. Since the IRS allows buyers to use the lower of their income from the current or prior year, timing the vehicle purchase around lower-income years can help.
One way to stay under the income threshold is by deferring income. If possible, delaying a year-end bonus, pushing stock sales into a future year, or postponing capital gains realizations can help keep MAGI within the limit.
Maximizing pre-tax contributions is another effective strategy. Contributing to retirement accounts such as a 401(k) or traditional IRA reduces taxable income. Similarly, funding a health savings account (HSA) or flexible spending account (FSA) can lower MAGI.
Taxpayers with investments can also consider tax-loss harvesting. Selling underperforming investments to realize losses can offset capital gains and reduce taxable income, which may help keep MAGI below the limit.
For business owners, adjusting the timing of income recognition can be beneficial. Delaying invoicing until the following tax year or making business-related purchases before year-end can help reduce reportable income.
Additional EV Tax Credit Requirements Beyond Income Limits
Income eligibility is just one of the criteria for claiming the EV tax credit in 2024. Buyers must also ensure their vehicle meets other key requirements.
First, the vehicle must be manufactured in North America. This applies to both fully electric and plug-in hybrid models. A regularly updated list of eligible vehicles is provided by the IRS.
Second, the credit is subject to vehicle price limits. In 2024, the EV tax credit is available only if the manufacturer’s suggested retail price (MSRP) does not exceed:
- $80,000 for vans, SUVs, and pickup trucks
- $55,000 for sedans and other vehicles
Additionally, the EV must be purchased for personal use and not for resale. Business purchases may qualify under separate commercial EV tax incentives.
There are also battery component requirements. A percentage of the battery’s minerals and components must come from the U.S. or free trade partners to qualify for the full credit.
Finally, the EV tax credit is non-refundable. This means it can only be used to offset tax liability. If a taxpayer’s federal tax bill is less than the credit amount, they will not receive the difference as a refund. Those with low tax liability may need to plan accordingly to take full advantage of the credit.
How the EV Tax Credit 2024 Income Limit Affects High Earners
For high-income taxpayers who exceed the income limits, the federal EV tax credit may not be available, but there are alternative ways to save on an electric vehicle purchase.
One option is purchasing a used EV, which qualifies for a separate tax credit of up to $4,000. The income limits for used EV buyers are lower than for new vehicles:
- $75,000 for single filers
- $112,500 for heads of household
- $150,000 for married couples filing jointly
While these thresholds are still restrictive, they may provide an opportunity for those who do not qualify for the new vehicle credit.
Another alternative is taking advantage of state and local EV incentives. Many states offer additional rebates, tax credits, or sales tax exemptions, which may have different income qualifications. Some utility companies also offer rebates for purchasing or installing home charging equipment.
For business owners, leasing an EV instead of purchasing it may be a smart alternative. The commercial clean vehicle credit does not have income limits or MSRP caps, making it a potential workaround for those who exceed the personal tax credit limits. Additionally, leasing allows businesses to deduct depreciation expenses, further reducing taxable income.
Another way to reduce costs is through charging station tax credits. Homeowners and businesses that install EV chargers may qualify for a credit covering 30% of installation costs, up to $1,000 for residential properties and higher amounts for commercial locations.
High-income individuals should consider these alternative incentives to maximize their tax savings when purchasing an EV.
How the EV Tax Credit Fits Into Long-Term Tax Planning
The EV tax credit is just one piece of a larger tax strategy. For those near the income limits, planning for future EV purchases and other tax incentives requires careful financial management. Consider these key factors when integrating the EV tax credit into your long-term tax plan:
- Future Income Changes – If a taxpayer expects their income to decrease in the coming years due to retirement, career shifts, or business changes, they may qualify for the EV tax credit in a later year, even if they are ineligible now.
- Legislative Adjustments – Tax laws, including EV credit eligibility and income limits, frequently change. Staying informed about future legislative updates can help taxpayers plan their vehicle purchases around potential policy shifts.
- Alternative Financing Options – Leasing an EV, especially through a business, can allow access to commercial clean vehicle credits that do not have personal income limits. This can be a viable workaround for high-income earners who cannot claim the standard credit.
- Timing Major Purchases – If an individual plans to claim other tax credits or deductions in the same year, they should consider how stacking multiple incentives affects their overall tax liability. Managing income recognition carefully can help maximize available tax benefits.
- State and Local Incentives – In addition to federal credits, state and local programs offer rebates, tax breaks, and reduced registration fees. These programs may have different eligibility criteria and can supplement federal savings.
Long-term tax planning ensures that individuals maximize available incentives while minimizing tax burdens. A tax professional can provide guidance on structuring income, deductions, and purchases to take full advantage of tax credits like the EV incentive.
How Dimov Tax Can Help With EV Tax Credit Planning
The EV tax credit 2024 income limit can prevent some buyers from claiming the full federal tax credit, but with careful planning, it may still be possible to qualify. Timing income recognition, maximizing tax deductions, and exploring state and business-related incentives can help make EV ownership more affordable.
Since income limits, vehicle eligibility, and tax laws change frequently, working with a tax professional is the best way to ensure compliance and maximize savings. Dimov Tax specializes in tax planning strategies, helping clients navigate EV tax credits, reduce taxable income, and find alternative incentives.
Contact Dimov Tax today to explore your options and take advantage of tax-saving opportunities when purchasing an electric vehicle.