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. Granted, this is significantly less than the $7,500 maximum credit for a new EV—but with the old adage of a new car losing 20% of its value when its driven off the lot, it presents an opportunity to get a bargain on a low-mileage used vehicle. In fact, for any car that costs more than $17,501, it is a better deal than the new EV incentive.
Qualified Used Electric Vehicles
To qualify for the Used Clean Vehicle Tax Credit a car must meet a few requirements.
First, the vehicle must be an electric vehicle of a model year at least two years prior to the year in which it is purchased. For 2024— this would mean a qualified used vehicle would need to be a model year 2022 or earlier. FuelEconomy.gov maintains a database of qualified models, which eliminates any guesswork.
Second, 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—this eliminates both private sales and quick-flip schemes between parties to generate multiple tax credits from the same vehicle.
In addition to meeting the qualified used electric vehicle requirements, the purchaser must meet gross income requirements— $150,000 or less in adjusted gross income in the previous year for joint filers and surviving spouses, $112,500 or less for heads of household, and $75,000 or less for other filers.
Crunching The Numbers
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 out well ahead of the others in terms of affordability with a $15,828 before-credit estimated sale price.
If sale price is less a concern and range is a deciding factor, the 2022 Lucid Air began its lifecycle with an astonishing 446 mile range, but Kelley Blue Book estimates the 2022 model year will still fetch north of $57,000—so the $4,000 used EV credit may do little more than finance new floor mats.
Putting It All Together
If the adage that a car loses 20% of its value when its driven off the lot is indeed 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. Thus, there are no new electric vehicles as of publication for which the new EV credit would be a better value—assuming relatively modest additional maintenance requirements for a used model.
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.
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