Used electric car and PHEV buyers can currently get up to a $4,000 tax credit, at least through the end of 2025
A 2020 Toyota Prius Prime Plug-In Hybrid.
By Keith Barry
Anyone who buys a used electric vehicle (EV) or plug-in hybrid vehicle (PHEV) has been eligible for a tax credit of up to $4,000. This credit has been in place since the passage of the 2022 Inflation Reduction Act (IRA). Now, proposed legislation would eliminate the EV tax credit program, which could make some new and used EVs more expensive.
The change is due to a new budget reconciliation bill, also known as the One Big Beautiful Bill Act. Among other sweeping changes, it includes a provision that will end new and used EV tax credits on Dec. 31, 2025. If it passes in its current form, the bill will also implement a $250 yearly federal tax on electric vehicles and a $100 yearly federal tax on hybrid vehicles. So far, the legislation has passed the House of Representatives and awaits action in the Senate.
In the meantime, buyers can still claim the tax credit on eligible used vehicles. However, that doesn’t mean you should rush into a purchase to beat a deadline. “Even if the tax incentive goes away, used electric vehicles will likely still cost less than similar gas-powered vehicles,” says Alex Knizek, associate director of auto test development at CR’s auto test center. “Because EV technology is developing so quickly, depreciation on used EVs is still high.”
Knizek says it’s only worth it to take advantage of the tax credit if you’ve already done your research and found a safe, reliable used EV or PHEV that fits your needs and budget. “Otherwise, take your time and find the right car,” he says.
In addition, it’s important to know that the majority of used EVs don’t qualify for the used tax credit anyway. Requirements that the used car’s price not exceed $25,000 and a stipulation that almost disqualifies most vehicles with more than one owner mean that only about 18 percent of used EVs and PHEVs currently on sale likely qualify for the credit, according to CR’s analysis of online used car databases.
How Much Is the Used EV Tax Credit?
The tax credit for a used EV or PHEV is either $4,000 or 30 percent of the sale price of the vehicle, whichever is lower. That means if you’re spending less than $13,333, you’re not going to get the full $4,000. For example, if you’re buying an older used Chevrolet Volt or Nissan Leaf for $8,000, your tax credit would be $2,400.
Who Qualifies for a Used EV Tax Credit?
Buyers must have a modified adjusted gross income (AGI) below $150,000 for joint filers, $112,500 for a head of household, and $75,000 for an individual—lower than the income limits for buyers of new EVs. You can’t get the credit if you’re a dependent on someone else’s taxes, you can’t sell a car to yourself, and you can’t claim the credit more than once every three years.
To determine eligibility, you can choose to use your income either from the year you take delivery of the vehicle or the year before. If your income exceeds the limit and you claim the credit, the IRS will require you to repay it.
Which Cars Qualify for the Used EV Tax Credit?
There are several rules about which EVs, fuel-cell vehicles, and PHEVs qualify:
• The car’s model year must be at least two years older than the current calendar year. That means in 2025, cars up to the 2023 model year are eligible. Only model year matters—not the year a car was first sold or registered.
• The car cannot have a sale price of more than $25,000, not including taxes and fees.
• Any car that has already been resold to a qualified buyer after Aug. 16, 2022 (the date the IRA went into effect), is no longer eligible for a tax credit. This is called the “first transfer” rule, and it is intended to prevent cars from being purchased and resold by individuals solely for the purpose of claiming tax credits (dealer transfers don’t count), says Chris Harto, CR’s senior policy analyst for transportation. But the way the law is written severely restricts which vehicles will ever qualify, he says. It might also make it difficult to determine how much a disqualified vehicle should cost compared with one that qualifies for the credit, especially as dealerships factor the tax credit into advertised prices.
Do You Have to Buy a Used EV From a Dealership?
Yes. According to the IRS, a car must be purchased from an authorized dealership that reports required information to you at the time of sale and to the IRS. Private sales—buying a car from a friend or family member or a stranger on Facebook Marketplace, for example—don’t count.
Dealerships are now able to offer the tax credit as an instant discount to qualifying car buyers. Some dealerships factor the tax credit into online pricing, so be sure to read the fine print—especially if you don’t qualify for the credit.
This dealership already factored a tax credit into the advertised price of this Nissan Leaf.
Photo: CarVision.com
You Actually Qualify! Now, How Do You Get the Credit?
In 2024, the tax credit turned into an instant rebate, available at most dealerships, and can be claimed regardless of your tax burden. Otherwise, buyers can submit Form 8936, “Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles),” with their tax returns.
Which Used EVs and PHEVs Are Eligible for a Tax Credit?
The IRS released a long list of used EVs and PHEVs that, in theory, qualify for a tax credit. However, the list doesn’t take into account restrictions on a vehicle’s maximum sale price. (Good luck getting a one-owner 2021 Bentley Bentayga PHEV for less than $25,000!)
Of the more than 80 EVs and PHEVs on the IRS’ list, only a handful have at least average reliability, largely because the earliest crop of EVs struggled in our reliability surveys.
Read our used EV buying guide to learn more.
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