Understanding the New and Used Clean Vehicle Credits (Updated Rules)

This step-by-step guide walks you through the full process for claiming Clean Vehicle Credits under the Inflation Reduction Act. It explains what happens at each stage, what you need to do, and what to expect from the IRS and the seller. The process covers both the New Clean Vehicle Credit and the Used Clean Vehicle Credit and tells you how to file Form 8936 with your federal tax return to claim your amount.

Overview of the journey: shopping to claiming

• You confirm whether your vehicle and your income fit the rules for the credit.
• The dealer provides required details at the time of sale.
• You take delivery (place the vehicle in service) and keep all records, including the VIN.
• You file your tax return for that year and include Form 8936 to claim the credit.
• The IRS processes your return based on the information you and the seller reported.

Because the credit is nonrefundable, it can reduce your tax bill to zero, but it won’t create a refund by itself. You also can’t carry any extra credit to a later year.

Step 1: Pre-purchase checks — are you eligible?

Start with your personal eligibility. To claim either credit:

• You must buy the vehicle for your own use (not for resale).
• You must use it primarily in the United States 🇺🇸.
• Confirm your modified adjusted gross income (MAGI). You may use your MAGI from the year you take delivery or from the prior year — whichever is lower.

MAGI limits:

• New Clean Vehicle Credit:
  • $300,000 — married filing jointly or qualifying surviving spouse
  • $225,000 — head of household
  • $150,000 — all others
• Used Clean Vehicle Credit:
  • $150,000 — married filing jointly or qualifying surviving spouse
  • $112,500 — head of household
  • $75,000 — all others

This income check is a key decision point. If your MAGI is under the limit in either year, you can move forward. According to analysis by VisaVerge.com, many buyers use the prior-year MAGI to qualify when a pay raise pushes them above the limit in the delivery year.

Step 2: Vehicle eligibility — new and used paths

New Clean Vehicle Credit (2023–2032)

• Credit amount: up to $7,500
  • $3,750 if the vehicle meets the critical minerals requirement
  • $3,750 if the vehicle meets the battery components requirement
• Vehicle requirements:
  • Battery capacity of at least 7 kWh
  • Gross vehicle weight rating under 14,000 pounds
  • Made by a qualified manufacturer (fuel cell vehicles are an exception)
  • Final assembly in North America
  • Must meet the critical mineral and battery component rules (as of April 18, 2023)
• MSRP caps at time of sale:
  • $80,000 — vans, SUVs, pickup trucks
  • $55,000 — other vehicles
• Sale must be new, and the seller must report required information to you and the IRS

Used Clean Vehicle Credit

• Credit amount: 30% of the sale price, up to $4,000
• Vehicle requirements:
  • Purchased from a licensed dealer for $25,000 or less
  • Model year at least two years older than the calendar year of purchase (example: 2024 purchase needs a 2021 or older model)
  • Battery of at least 7 kWh (or eligible fuel cell vehicle)
  • Gross vehicle weight rating under 14,000 pounds
  • Used primarily in the United States
• Buyer restrictions:
  • Cannot be the original owner
  • Cannot be claimed as a dependent on someone else’s return
  • Cannot have claimed a used clean vehicle credit in the three years before purchase
• Dealer must report detailed sale information, including the VIN and battery capacity

Tip: At the dealership, ask for the window sticker and confirm final assembly location, battery capacity, and VIN. These details make filing smoother.

Step 3: At the time of sale — required seller reporting

For the New Clean Vehicle Credit the seller must:

• Report your name and taxpayer identification number to the IRS
• Give you a document listing the vehicle’s key specifications

For the Used Clean Vehicle Credit the dealer must report:

• Dealer’s name and taxpayer ID
• Buyer’s name and taxpayer ID
• Sale date and sale price
• Maximum credit allowed under IRC 25E
• VIN (if assigned)
• Battery capacity

Keep these records in your tax file. You’ll need the VIN for your return.

Step 4: Taking delivery — the date that matters

The credit applies based on when you place the vehicle in service, not when you sign the purchase agreement.

• Your credit amount — including whether the vehicle meets critical mineral and battery component requirements — is tied to the delivery date.
• Keep the delivery paperwork to prove when you took possession.

Step 5: Filing your taxes — claiming with Form 8936

When you file your federal return for the year you took delivery, include Form 8936 to claim Clean Vehicle Credits. Use the VIN and the details from the seller’s document.

• Follow the form instructions for each line, including any business use calculation.
• Official IRS resources:
  • Form page: Form 8936
  • Overview: IRS: Credits for New Clean Vehicles

Note: The credit is nonrefundable and cannot be carried forward. If your tax due is less than the credit, the extra amount disappears.

Step 6: Mixed business and personal use — calculating the business share

If you use the vehicle for both business and personal driving:

• Calculate business-use percentage:
  • Business miles (excluding commuting) ÷ Total miles for the year
• Apply this percentage per Form 8936 instructions.
• Keep a mileage log — a notebook or app is fine — to document business miles clearly.

Step 7: Special option at point of sale (starting 2024)

Starting January 1, 2024, many buyers can choose to transfer the value of the New Clean Vehicle Credit to the dealer at the time of sale.

• This can lower your purchase price or reduce your down payment.
• You must still meet the same MAGI rules and vehicle eligibility rules.
• Ask the dealer whether they participate and what paperwork you’ll receive.
• Keep all documents for your tax records.

Step 8: After filing — what to expect from the IRS

The IRS checks your claim using the VIN and the seller’s report.

• Because the IRS tracks credits by VIN, double claims are blocked.
• If something doesn’t match (incorrect VIN or missing seller report), you may get a notice.
• Respond with requested documents: bill of sale, window sticker, or dealer certificate.
• Ensure your tax return shows the same names and taxpayer IDs that the seller reported.

Important: Keep consistent names and taxpayer IDs between your return and the dealer’s report to avoid IRS notices.

Step 9: Common pitfalls and how to avoid them

• MAGI over the limit: Use the lower of the delivery year or prior year MAGI when it helps you qualify.
• MSRP misunderstanding: The cap is based on the manufacturer’s suggested retail price at sale, not the price you paid.
  • Destination fees don’t count toward MSRP, but manufacturer-installed options do.
• Delivery date vs. purchase date: The rules and credit amount depend on delivery (placed in service), not the day you signed.
• Missing or wrong VIN on Form 8936: Double-check it against the title or the dealer’s paperwork.
• Used credit repeat rule: If you claimed a used clean vehicle credit in the prior three years, you cannot claim it again yet.
• Business mileage: Don’t include commuting. Keep clean records to support your business-use percentage.

Step 10: Documentation checklist you can use

• Buyer and seller information sheet from the dealer (with your name and taxpayer ID)
• VIN and battery capacity confirmation
• Window sticker or equivalent (final assembly point, battery size)
• Bill of sale with sale date and sale price
• Proof of delivery date
• Mileage log if there’s business use
• Completed Form 8936 when you file

Store these records with your tax return in case of questions.

Step 11: If you’re buying used — what changes in the process

For the Used Clean Vehicle Credit, confirm:

• Price is $25,000 or less
• Model year is at least two years older than the calendar year you buy it
• Dealer is licensed and provides all required sale details
• If the vehicle lacks a VIN (rare), the dealer should note that
• You were not the original owner and haven’t claimed a used credit in the last three years

File Form 8936 at tax time with the VIN and dealer’s details to claim up to $4,000.

Step 12: For employers and business owners — a note on commercial credits

There is a separate Commercial Clean Vehicle Credit for vehicles used by a business and placed in service as depreciable assets.

• Rules, amounts, and calculations differ from the individual credits discussed here.
• If you’re buying for a company fleet, review the commercial rules before choosing a vehicle.

This article focuses on individual credits claimed with Form 8936.

Final preparation tips before you file

• Confirm your MAGI using both years and keep documents that show it.
• Recheck the vehicle’s battery size, final assembly point, and VIN before delivery.
• Make sure the dealer completes all required reporting at the time of sale.
• Keep a simple folder — paper or digital — with every item listed in the checklist.

Following these steps will help you claim the credit smoothly and avoid delays. Clean Vehicle Credits can make new EVs and FCVs more affordable and can help buyers choose used models that meet clear rules. By gathering the right documents early and filing Form 8936 with care, you set yourself up for a cleaner, simpler tax season.