Here’s how to get a $4,000 tax credit on a used electric car

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Buying a used electric car is going to get a lot cheaper for some shoppers in the near future, but not everyone.

Along with an updated federal tax credit scheme for new plug-in car purchases, the recently passed Inflation Reduction Act includes the first credit for used electric car purchases.

It doesn’t go into effect until 2024 and won’t apply to a lot of the cars you find on Craigslist or Facebook Marketplace, however.

The credit is only available for vehicles that are sold through a licensed dealer for $25,000 or less and have been in service for at least two years. It is only valid for the first time a vehicle is being resold from new.

NEW EV TAX CREDIT APPEARS TO BE LIMITED BY CONDITIONS

The new federal used car tax credit applies only to vehicles sold for $25,000 or less.
(Chip Somodevilla/Getty Images)

The amount of the credit is $4,000 or 30%, whichever is lower, so it maxes out on vehicles priced below $13,500, but income limits also apply and are half of those for the new electric car credit.

Single-filers are restricted to $75,000 gross annual income, head-of-households to $112,500 and couples to $150,000.

The National Independent Automobile Dealers Association, which represents the used car dealer industry, told Fox News Digital that it doesn’t think the credit will benefit the used EV market much due to the restrictions.

Fully electric and plug-in hybrid vehicles will qualify for the used car tax credit.

Fully electric and plug-in hybrid vehicles will qualify for the used car tax credit.
(Mario Tama/Getty Images)

“According to the provisions laid out in the IRA, the parameters for any consumer that is in search of a used EV would be extremely difficult,” the organization said.

“Our members serve all levels of income and for those families within the criteria of the joint filing – most likely families with one, two or three children – this criteria limits the choices of finding a used EV under $25,000 that is two years old and makes it almost impossible. This criteria, while a good start, leaves more questions than answers on how our dealers and the consumers we service can receive these credits.”

ELECTRIC CAR TAX CREDIT: THESE ARE ALL OF THE VEHICLES THAT STILL QUALIFY … FOR NOW

Unlike the new car credit, the used cars don’t need to meet increasingly stringent domestic manufacturing and materials sourcing rules that have already eliminated all but 21 plug-in vehicles from eligibility, and Consumer Reports says that leaves buyers with a choice to make.

“If you’re interested in an EV or a plug-in hybrid and it qualifies for a tax credit today, don’t wait, because it might not qualify next year. But if you’re considering a used EV, it might be worth waiting,” Jake Fisher, senior director of Consumer Reports’ Auto Test Center said.

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Used car chain CarMax wouldn’t say how it expects the program to affect sales, but said it supports the change.

Sales of used EVs have doubled at CarMax over the past two years.

Sales of used EVs have doubled at CarMax over the past two years.
(Mario Tama/Getty Images)

“We are pleased about the used EV tax credit included in the Inflation Reduction Act signed into law,” the company said.

“In the last two years, CarMax’s retail sales of used electric and hybrid vehicles have more than doubled – making EVs one of our fastest growing categories.”

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