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ZETA

Another Consumer Win: The 25E Used Clean Vehicle Tax Credit Ensures EVs are More Accessible

Gabriel McFadden
Gabriel McFadden
Gabriel McFadden
May 17, 2024

Stimulating the used EV market is essential for widespread adoption of zero-emission vehicles: nearly 70% of all vehicles are purchased pre-owned. In May 2024, the Treasury Department released final guidance implementing the 25E Used Clean Vehicle Tax Credit. By making the credit transferable at the point of sale, 25E improves EV accessibility for low-income and historically disadvantaged communities, whose members are more likely to purchase used vehicles and more likely to live in areas with transportation-related poor air quality. With final rules now in place, the 25E credit will continue to be an important policy tool to expand access to EVs in the secondary market by improving vehicle affordability and simplifying the EV buying experience.

Fast Facts on the 25E Tax Credit

  • Equals 30% of the used vehicle sale price up to a maximum of $4,000.
  • Can only be claimed for vehicles costing $25,000 or less and are purchased from a qualified dealer. Buyers are encouraged to check with their dealer to ensure qualification.
  • Eligible vehicle technologies include all-electric, plug-in-hybrid, and fuel-cell electric vehicles with a battery capacity of least 7 kilowatt hours.
  • Can be claimed at the point of sale through a dealer credit transfer, enabling buyers the option to take advantage of the credit value upfront rather than waiting until filing their taxes. The buyer will still need to submit the Vehicle Identification Number (VIN) when filing.
  • Can only be claimed on the first sale of the used vehicle occurring after August 16, 2022.
  • The vehicle must be at least two years old and for use in the United States. The buyer must purchase the vehicle for their own use and not for resale. Credit is not available for peer-to-peer private-party transactions.
  • Buyer eligibility is subject to income limitations:

Benefits for Consumers

Beyond making used clean vehicles more affordable, the ability of the buyer to transfer the credit to the dealer and realize the value of the credit at the point of sale streamlines the process and offers near-instantaneous cost savings. The Department of Energy and the Environmental Protection Agency maintain an interactive list of vehicles eligible for the 25E credit to help assuage any concerns if the vehicle you are interested in purchasing is eligible. Consumers are also encouraged to check with their local dealer to ensure they are registered through the IRS to take advantage of the transferability program.

The 25E tax credit will help stimulate the development of the used EV market by helping align the current purchasing power of secondary EV demand segments with the existing supply of secondary market EVs. As the used EV market develops, the 25E credit ensures consumers can personally see the total cost of ownership savings from transportation electrification. 25E also prioritizes consumer choice as it gives prospective car buyers incentives to consider cleaner options that rival the prices of traditional combustion-powered vehicles.

Implications for EV Adoption

Anything that lowers the upfront cost of EVs, specifically used EVs, is a win for consumers. By helping to bring used EVs closer to price parity with combustion vehicles, 25E will lead to increased EV adoption broadly, which in turn will help the United States achieve its transportation decarbonization goals while saving drivers money. Many first-time car purchases are used vehicles, and increased used EV penetration will introduce more consumers to EVs, creating a snowball effect and increasing the likelihood of buying a new EV in the future. Higher demand for used EVs could also help improve the resale value of new EVs and thus make purchasing them more attractive.

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About ZETA

National policies to support 100% electric vehicle sales.

The Zero Emission Transportation Association (ZETA) is a federal coalition focused on advocating for 100% EV sales. Enacting policies that drive EV adoption will create hundreds of thousands of jobs, secure American global EV manufacturing dominance, drastically improve public health, and significantly reduce carbon pollution.