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1 [1] (April 2, 2026)

handle is hein.crs/goveucx0001 and id is 1 raw text is: Congressional Research Service Informing the IegisIat~ve debafl since 1914 Updated April 2, 2026 Clean Vehicle Tax Credits Prior to the enactment of the FY2025 reconciliation law (P.L. 119-21), the federal government offered three tax credits to incentivize the purchase of clean vehicles (electric vehicles, plug-in hybrid vehicles, and fuel cell vehicles). All three credits were created or substantially modified by P.L. 117-169, the Inflation Reduction Act of 2022 (IRA). This In Focus summarizes each clean vehicle credit, provides a brief discussion of relevant economic policy considerations, and discusses the repeal of the credits in the FY2025 reconciliation law. Clean Vehkce Credit (IC §30D) Taxpayers purchasing a qualifying new clean vehicle could claim a nonrefundable tax credit of up to $7,500 for vehicles acquired before October 2025. The maximum potential credit ($7,500) was the sum of two amounts: the critical mineral amount ($3,750) and the battery component amount ($3,750); the credit went into effect for vehicles acquired on or after April 18, 2023. (Fuel cell vehicles without batteries that meet other requirements were eligible for the full $7,500 credit, though fuel cell vehicles with batteries were subject to the rules below.) * For taxpayers to claim the critical mineral portion of the credit, at least a certain percentage of a car battery's critical minerals must have been extracted or processed in the United States or in a country with which the United States has a free trade agreement, or have been recycled in North America. The minimum percentage was 40% in 2023, 50% in 2024, and 60% in 2025. For vehicles acquired after 2024, no applicable critical minerals in the vehicle's battery could come from a foreign entity of concern (FEOC). An FEOC is defined as a nonstate actor that potentially poses an economic or security threat to the United States. * For taxpayers to claim the battery component portion of the credit, at least a certain percentage of an electric vehicle battery's component parts must have been manufactured or assembled in North America. The minimum percentage was 50% in 2023 and 60% in 2024 and 2025. Vehicles acquired after 2023 could not use battery components manufactured or assembled by an FEOC. In addition to the critical minerals and battery component requirements, qualifying clean vehicles had to meet other criteria. These additional criteria included a manufacturer's suggested retail price (MSRP) limit ($80,000 for vans, SUVs, and pickup trucks; $55,000 for other vehicles); a required gross vehicle weight rating (GVWR) of less than 14,000 pounds; and a battery capacity of at least 7 kilowatt- hours. The final assembly of all qualified vehicles must have ncrirred in North America To claim the credit, taxpayers must have had modified adjusted gross incomes (MAGIs), for either the current or previous year, at or below certain thresholds: $300,000 for married couples, $150,000 for single filers, and $225,000 for heads of household. The clean vehicle credit was generally nonrefundable, meaning taxpayers could not claim credit amounts in excess of their tax liabilities. Starting in 2024, taxpayers were allowed to transfer their credits to vehicle dealers. Dealers who received transferred credits were required to compensate buyers with either a cash payment or a price reduction equal to the value of the credit. Transferred credits could exceed taxpayers' income tax liabilities, effectively making transferred credits fully refundable. Taxpayers who transferred a credit but later exceeded their MAGI limit were required to pay back the credit (to the IRS) when filing their taxes. Credit for Previousl Owned Clean Vehicles (IRC §25E Taxpayers purchasing a qualifying previously owned clean vehicle could claim a nonrefundable tax credit equal to 30% of the vehicle's sales price, up to a maximum credit of $4,000. This credit was commonly referred to as the used clean vehicle credit. Taxpayers could claim the credit only for vehicles acquired before October 2025. The credit could be claimed once per vehicle, and the vehicle needed to satisfy other criteria. The vehicle must have been purchased from a licensed dealer for $25,000 or less, had a GVWR of less than 14,000 pounds, and had a battery capacity of at least 7 kilowatt-hours. In addition, the vehicle's model year must have been at least two years before the year of purchase, and the dealer must have produced a report of the transaction for both the buyer and the IRS. Taxpayers with MAGIs at or below $150,000 for married couples, $75,000 for single filers, and $112,500 for heads of household in either the current or previous year qualified for this tax credit. Taxpayers could claim the credit at most once every three years. Rules for credit transfers under the used clean vehicle credit were similar to those under the clean vehicle credit. Credkt for Qualifed Commerdal Clean Vehicles (IC §45W) By purchasing a qualified clean vehicle, businesses and tax- exempt organizations could qualify for a tax credit of up to $40,000. For plug-in hybrid vehicles, the credit was equal to the lesser of the incremental cost of the vehicle (the difference between its price and the price of a gas- or diesel-powered vehicle of similar size and use) or 15% of the vehicle's cost basis. For electric vehicles and fuel cell vehicles, the credit equaled the lesser of the incremental cost of the vehicle or 30% of its cost basis. The credit could