Since 2023, qualified used electric vehicles have been eligible for a federal tax credit for up to 30% of the sale price or $4,000, whichever is lower. Although this is significantly less than the $7,500 maximum credit for a new EV, it presents an opportunity to get a bargain on a low-mileage used vehicle. For any car that costs more than $17,501, it is a better deal than the new EV incentive. To qualify for the Used Clean Vehicle Tax Credit, a car must be an electric vehicle of a model year at least two years prior to the year in which it is purchased.
The vehicle must be purchased all-in for $25,000 or less and be sold by a licensed dealer that has registered with the IRS. The transfer from the dealer to the purchaser must be the first since August 16, 2022. In addition to meeting the qualified used electric vehicle requirements, the purchaser must meet gross income requirements as well. The purchaser must have $150,000 or less in adjusted gross income in the previous year for joint filers and surviving spouses.
Taking the Kelley Blue Book used prices for each of the qualifying used EVs, the Nissan Leaf, Chevrolet Bolt EV, Hyundai Kona Electric, Mini Cooper SE Hardtop, and Mazda MX-30 come out as the cheapest all-in 2022 model year EVs. The Nissan Leaf is the most affordable with an estimated sale price of $15,828 before the credit. If sale price is less a concern and range is a deciding factor, the 2022 Lucid Air began its lifecycle with a 446-mile range but the model year will still fetch north of $57,000.
If the adage that a car loses 20% of its value when it’s driven off the lot is true, a new car price need only be more than $17,501 for it to be a better deal in the used market considering the $4,000 federal tax credit. This means there are no new electric vehicles as of publication for which the new EV credit would be a better value. Ultimately, the expanding used EV market, coupled with the federal tax credit, presents an opportunity for buyers to secure a cost-effective and eco-friendly vehicle. The tax credit could help buyers save money and find a vehicle that fits their needs and budget.
