How Do Tax Rebates and Credits Work for Auto, Home and Business?

A tax rebate is a refund that comes quicker than a tax return, and tax credits are deducted from taxes owed on your tax returns. Credits can also come quicker if you buy a clean vehicle at a dealership that works with the IRS to qualify you on the spot. Qualification would simply be verified at the time of purchase. You may have a rebate or tax credits for buying a clean hybrid, plug-in or fully electric vehicle or charging equipment. You may also get one if you have solar or other alternative clean energy usage in a home that is rented or owned. Businesses can also benefit from rebates and credits, especially if they own a clean vehicle for work purposes or if they install charging stations on business property. Here’s more.

What Is a Tax Rebate vs a Tax Credit?

Tax Rebate

A tax rebate is a refund after a retroactive tax decrease and gets to you quicker than a tax refund and at any time during the year. A tax rebate is what is paid out to you if the tax liability accumulated is less than tax liability paid in a calendar year. Tax authorities review and accept or reject the rebate based on validity. If accepted, the taxpayer either by check or direct deposit and does not need to wait until filing taxes.

• State and local governments provide tax rebates for the purchase of solar.
• State and local governments encourage the purchase of electric or hybrid cars to reduce gas consumption in the form of a tax rebate.
• State and local governments also encourage the purchase of used electric vehicles (EVs) or hybrid cars with tax credits (more on this below.
• You can transfer tax credits to an eligible car dealer for instant deduction of purchase price.
• Commercial clean vehicle tax credits and deductions on business insurance costs apply for business owners.

EV Tax Credits

A tax credit is a deduction of taxes owed and may apply to charitable contributions or medical expenses and other types of costs that lower tax liability and often increase tax return payouts or decrease taxes owed.

A tax credit on a used EV may apply at the time of purchase as a discount when buying from a partnering dealership or online dealership, like Carvana. You cannot claim the credit twice. Going to an eligible dealer is simply quicker than deducting at tax time. Sellers must register online and report the sale to the IRS. Otherwise, your vehicle won't be eligible for the tax credit.⁽¹⁾

Basically, if you buy a new EV or hybrid, you may be eligible for a tax credit up to $7,500. If you buy a used EV or hybrid, the tax credit maximum is $4,000. Federal tax credits do not reduce the selling price of the vehicle or reduce the sales or use tax.

Sale from private owners does not qualify for the tax credit. Also, fewer people qualify for these rebates and credits due to battery manufacturing restrictions.

Tax credits are non-refundable.

The following 2025 models are qualified for $7,500 in tax credits at an $80,000 MSRP limit⁽³⁾:

• Acura ZDX (2024-2025)
• Cadillac LYRIQ: Luxury and Sport Models (2024-2025)
• Cadillac OPTIQ (2025)
• Chevrolet Blazer EV: LT, RS and SS Models (2024-2025)
• Chevrolet Equinox EV: LT and RS Models (2024-2025)
• Chevrolet Silverado EV: LT Model (2025)
• Chrysler Pacifica PHEV (2024-2025)
• Ford F-150 Lightning: FLASH Trim (2024-2025)
• Ford F-150 Lightning: LARIAT and XLT Trim (2023–2025)
• Genesis Electrified GV70 (2025)
• Honda Prologue (2024-2025)
• Hyundai Ioniq 5 (2025)
• Hyundai Ioniq 9 (2025)
• Kia EV6 (2026)
• Kia EV9 (2026)
• Tesla Cybertruck: Single and Dual Motor (2025)
• Tesla Model 3 Long Range: AWD and RWD (2025)
• Tesla Model 3 Performance (2025)
• Tesla Model X AWD (2025)
• Tesla Model Y Long Range: AWD and RWD (2025)
• Tesla Model Y Performance (2025)

The following 2024 models are qualified for $7,500 in tax credits at an $80,000 MSRP limit⁽⁵⁾:

• Acura ZDX (2024)
• Cadillac LYRIQ (2024-2025)
• Cadillac OPTIQ (2025)
• Chevrolet Blazer (2024-2025)
• Chevrolet Bolt (2022-2023)
• Chevrolet Bolt EUV (2022-2023)
• Chevrolet Equinox (2024-2025)
• Chevrolet Silverado (2025)
• Chrysler Pacifica PHEV (2022-2024)
• Ford F-150 Lightning: Standard, Extended Range Battery (2022-2025)
• Honda Prologue (2024)
• Tesla Model 3 Long Range: AWD and RWD (2024-2025)
• Tesla Model 3 Performance (2023-2025)
• Tesla Model X AWD (2023-2025)
• Tesla Model Y AWD (2023-2024)
• Tesla Model Y Long Range AWD (2025)
• Tesla Model Y Long Range RWD (2024-2025)
• Tesla Model Y Performance (2023-2025)
• Tesla Model Y RWD (2024)
• Volkswagen ID.4 AWD Pro (2023-2024)
• Volkswagen ID.4 AWD Pro S (2023-2024)
• Volkswagen ID.4 AWD Pro S Plus (2023-2024)
• Volkswagen ID.4 Pro (2023-2024)
• Volkswagen ID.4 Pro S (2023-2024)
• Volkswagen ID.4 Pro S Plus (2023-2024)
• Volkswagen ID.4 S (2023-2024)
• Volkswagen ID.4 Standard (2023-2024)

The following 2024 models are qualified for $3,500 in tax credits at an $80,000 MSRP limit:

• Audi Q5 PHEV 55 TFSI e quattro (2023-2024)
• Audi Q5 S Line 55 TFSI e quattro (2023-2024)
• Ford Escape (2022-2025)
• Jeep Grand Cherokee PHEV 4xe (2022-2024)
• Jeep Wrangler PHEV 4xe (2022-2024)
• Lincoln Corsair Grand Touring (2022-2025)
• Nissan Leaf S (2024)
• Nissan Leaf SV Plus (2024)
• Rivian R1S Dual Large (2023-2024)
• Rivian R1S Dual Standard, Standard+ (2024)
• Rivian R1S Performance Dual Standard+ (2024)
• Rivian R1S Quad Large (2022-2024)
• Rivian R1T Dual Large (2023-2025)
• Rivian R1T Dual Max (2023-2024)
• Rivian R1T Dual Performance Large (2023)
• Rivian R1T Dual Standard, Standard+ (2024)
• Rivian R1T Performance Dual Standard+ (2024)
• Rivian R1T Quad Large (2022-2024)

Used EV Tax Credit

If you bought a used EV in January 2023 or later, you can get a credit up to 30% of the sale price or up to a maximum credit of $4,000. You may have transferred the credits at the dealership where you purchased the vehicle or you can use the time-of-sale report the dealer should have given you to deduct it on your taxes, using Form 8936. There’s more, so keep reading.⁽²⁾

Do I Qualify for a Tax Rebate on My Car?

First, use the vehicle identification number (VIN) to determine whether or not it was assembled in North America. If it was not, you do not qualify for a rebate. To qualify for an EV tax rebate, your vehicle must also meet manufacturer suggested retail price (MSRP) must meet requirements, either $80,000 for trucks, SUVs and vans and $55,000 for sedans and other passenger vehicles. MSRP does not include taxes and dealership fees.⁽¹⁾

You must also meet income requirements. For a single and married couple who each files separately, you must meet these qualifications:

If married and filing jointly these are the income requirements:

If your income is above the required income cap but was below the threshold the year prior, it will apply so that the rebate or credits apply.

The used EV must have cost $25,000 or less and can only have had one previous owner. Used vehicles must be two years old or older, weigh less than 14,000 pounds and have at least 7 kilowatt hours of battery capacity.⁽²⁾

How Do I Claim the Rebate or Credits

The steps on getting a rebate or credits on new and used vehicles are the same. The time-of-sale report is important to keep a copy of, and it’ll be issued at the time of purchase.

1. Keep the time-of-sale report when you buy the vehicle.
2. Transfer the credit at the time of sale for a deduction of the total purchase price or file Form 8936 with your taxes for the year in which you purchased the vehicle.⁽¹⁾

Do I Qualify for the Alternative Fuel Vehicle Refueling Property Credit?

If you installed electric vehicle charging equipment in your principal home, you are eligible for a credit of 30% of the cost, up to $1,000 for each one that you installed. If it’s rental property, you can claim it as a business. The device cannot be pre-owned and the home must be in an eligible census tract.⁽⁴⁾

Do I Qualify for a Commercial Clean Vehicle Tax Credit?

As a business owner, not only should you see if you qualify for a commercial clean vehicle tax credit but you may also be eligible for credits up to $100,000 for installing charging property on the business property.⁽⁴⁾

You will not get back more than you own in taxes as an organization, if you are eligible for credits. However, a 45W credit can be added to the following year’s taxes as a general business credit.

Businesses (specifically partnerships and S corporations) must file Form 8936, Clean Vehicle Credits. Otherwise, they can report the credit on line 1y in Part III of Form 3800. Tax-exempt organizations must file a Form 990-T, Exempt Organization Business Income Tax Return.⁽⁶⁾

Here is a breakdown of eligibility and factors that determine the number of allotted credits⁽⁶⁾:

• If the vehicle is less than 14,000 pounds, with a minimum of 7 kilowatt hours, the maximum credit is $7,500.
• If the vehicle is 14,000 pounds or more, with a minimum of 15 kilowatt hours, the maximum credit is $40,000.
• Some A fuel cell motor vehicles are also eligible, if they meet the requirements of IRC 30B(b)(3)(A) and (B).
• Factors that also determine credits include: engine type and how much more the EV or hybrid cost more than its gas-powered counterpart.
• The vehicle must be used for title II on public roads or be defined as mobile machinery as in IRC 4053⁽⁸⁾.
• The vehicle can’t claim credit if credits were already granted in tax sections 30D or 45W.

Earn Credits for Installing a Charging Station on Commercial Property

If you installed a qualified vehicle refueling or electric vehicle recharging apparatus on commercial property you’re probably eligible for an Alternative Fuel Vehicle Refueling Property Tax Credit up to $100,000 for each qualified charger. Tax exempt owners can claim the credit through elective pay or direct pay. In some instances, the credits can be transferred and claimed at the time of installation.⁽⁴⁾

Deduct Commercial Insurance! Premiums on Taxes

Any and all types of commercial business insurance premiums, including those for business car insurance, are tax deductible. If you bought an EV and use it for business-related rides, it’s a good idea to buy business car insurance or else your claim may get rejected if you have an accident.

General liability insurance premiums, business owners policy premiums (BOP) – you can deduct all of these from your earnings each tax year.

What Is the CC4A Program?

CC4A stands for Clean Air for All and is a California initiative to offer financial incentives, like grants, for low-income Californians to replace their gas-powered vehicles with hybrids or EVs. They also offer free public transportation vouchers.⁽⁷⁾

Unlike a tax rebate or credits which often do not apply for leasing, lower income individuals can reap the benefits of money towards a cleaner car by purchasing or leasing:

• a new hybrid electric vehicle,
• a used hybrid electric vehicle,
• a plug-in hybrid electric vehicle (PHEV),
• a zero-emission vehicle (ZEV),
• or a zero-emission motorcycle (ZEM).

Do I Qualify for a Solar Rebate and How Do I Claim It?

Both property owners and renters are eligible for a solar rebate and other residential clean energy property installed in the primary residence. Landlords are not eligible to receive the credit as property owners who do not live in the home. You may also qualify for the rebate if your home uses wind, geothermal, fuel cells or battery storage technology.

Fuel cell property is $500 for each half kilowatt. If multiple people live in the home, the combined credit maximum is $1,667 for each half kilowatt of fuel cell capacity.

Property claimed must not have had a previous owner. Here are some types of clean energy property that are eligible for credits⁽⁸⁾:

• Solar electric panels
• Solar water heaters
• Wind turbines
• Geothermal heat pumps
• Fuel cells
• Battery storage technology

The solar credit amounts to 30% of the costs of new, qualified improvement installed anytime from 2022 through 2032. The credit percentage rate phases down in 2033 to 26% and then 22% for 2034.

You can't exceed the amount you owe in taxes but credits can be carried over to the following year or years.⁽⁸⁾

California solar incentives may be the most comprehensive of all the states.

To claim the credits or rebate, file Form 5695, Residential Energy Credits with your tax return. Also contact your utilities company to see if you qualify for another way to save!⁽⁸⁾