Do any hybrids qualify for a tax credit?

Yes—but only plug-in hybrids (PHEVs) can qualify for U.S. federal tax incentives, while conventional (non-plug-in) hybrids do not. New PHEVs may be eligible for the federal Clean Vehicle Credit if they meet strict sourcing, assembly, price, and income rules; used PHEVs can qualify under a separate used-vehicle credit; and leases can benefit from a commercial credit that dealers often pass on as discounts. State and local incentives may add more savings, typically for PHEVs rather than conventional hybrids.

What “hybrid” means for tax purposes

For federal incentives, the law distinguishes between conventional hybrids (HEVs) and plug-in hybrids (PHEVs). HEVs cannot be charged from an external source and therefore do not qualify. PHEVs have a rechargeable battery (at least 7 kWh) and can be plugged in. Only PHEVs fall under the “clean vehicle” umbrella for federal credits.

New Clean Vehicle Credit (IRC 30D): When a PHEV qualifies

The primary federal incentive for new vehicles is the Clean Vehicle Credit, worth up to $7,500. PHEVs can qualify if they meet all program requirements, which have tightened under the Inflation Reduction Act and subsequent rules.

The following list outlines the core eligibility criteria that a new plug-in hybrid must meet to qualify for the Clean Vehicle Credit:

• Plug-in criteria: Battery capacity of at least 7 kWh and the ability to recharge from an external source.
• Final assembly in North America: The vehicle must be assembled in the U.S., Canada, or Mexico.
• MSRP caps: Manufacturer’s suggested retail price must not exceed $55,000 for cars or $80,000 for SUVs, vans, and pickups (based on EPA classification for the specific VIN).
• Income limits: Modified adjusted gross income must be at or below $150,000 (single), $225,000 (head of household), $300,000 (married filing jointly), or $150,000 (married filing separately). You may use current or prior tax year, whichever is lower.
• Battery sourcing rules: The credit is split into two $3,750 parts tied to critical mineral and battery component requirements; a PHEV can earn one, both, or neither.
• Placed-in-service and use: The vehicle must be new (original use), placed in service by you, and used primarily in the U.S.
• Point-of-sale transfer (optional): Since 2024, eligible buyers can have the dealer apply the credit upfront, reducing the out-the-door price; the buyer must still meet income limits.

If any required condition is not met—especially North American assembly or battery sourcing—the PHEV will not receive the new-vehicle credit, even if it is a plug-in model.

Why eligibility changes year to year

Federal “foreign entity of concern” (FEOC) rules took effect in stages: battery components from FEOC were barred starting in 2024, and critical minerals from FEOC are barred starting in 2025. As a result, some PHEVs that qualified in early 2023–2024 lost eligibility later, and vice versa, depending on their supply chains. Because models move on and off the qualified list, always check the current IRS/DOE database before you buy: see the “Tax Credits for New Clean Vehicles” tool at fueleconomy.gov and the IRS qualified vehicle list at irs.gov/cleanvehicle.

Used Clean Vehicle Credit (IRC 25E): A practical path for many PHEVs

Even if a new PHEV doesn’t qualify, a used one often can under a separate incentive. The Used Clean Vehicle Credit is up to $4,000 (30% of the sale price, capped at $4,000) and has simpler vehicle rules.

Here are the key used-credit requirements for a plug-in hybrid:

• Vehicle type: Must be a plug-in vehicle (battery ≥7 kWh) under 14,000 pounds GVWR.
• Age and price: At least two model years old at purchase; sale price must be $25,000 or less.
• Dealer purchase: Must be bought from a licensed dealer (not a private-party sale).
• First transfer: The credit applies to the vehicle’s first resale after August 16, 2022.
• Buyer limits: Income caps are $75,000 (single), $112,500 (head of household), $150,000 (married filing jointly). You can claim this credit only once every three years.
• No sourcing/assembly rules: Unlike the new-vehicle credit, there are no U.S. assembly or battery sourcing requirements for the used credit.
• Point-of-sale option: As with new vehicles, you can transfer the credit to the dealer at purchase starting in 2024.

For budget-focused shoppers, the used credit is often the easiest way to save on a PHEV, since sourcing rules do not apply and the price cap fits many used plug-ins.

Leasing: Commercial Clean Vehicle Credit (IRC 45W) often passes through

If you lease a PHEV, the dealer/lessor can claim a commercial clean vehicle credit and typically pass some or all of it to you as a lower monthly payment or capitalized cost reduction. This credit is not subject to the consumer income or MSRP caps and is generally not constrained by the same sourcing rules. This approach has made many imported PHEVs effectively “incentivized” via lease offers, even when they don’t qualify for the 30D new-vehicle credit.

State and local incentives can stack—mostly for PHEVs

Several states and utilities offer additional rebates or tax credits for plug-in vehicles, which may be combinable with federal benefits. Conventional (non-plug-in) hybrids rarely receive state incentives today, but plug-in hybrids often do. Check your state energy office and your electric utility for current programs.

Below are common types of state and local benefits you may find for PHEVs:

• Point-of-sale rebates from state agencies that reduce the purchase price.
• Income-qualified bonus incentives for lower- and moderate-income households.
• Utility rebates for buying a PHEV or installing a home charger.
• Non-cash perks such as HOV lane access, emissions-testing exemptions, or reduced registration fees.
• Sales tax exemptions or reductions in a few jurisdictions.

Because state programs change frequently and can run out of funding, verify details through your state’s official site or the DSIRE database at dsireusa.org before you buy.

How to check if a specific PHEV qualifies right now

Eligibility can hinge on trim, battery, assembly plant, and even mid-year supplier changes. Vet a specific vehicle and VIN before you sign.

Use the following steps to confirm eligibility:

1. Search the official list: Use the “Tax Credits for New Clean Vehicles” tool at fueleconomy.gov or the IRS qualified list at irs.gov/cleanvehicle.
2. Verify VIN details: Ask the dealer to run the VIN through the IRS/DOE tool to confirm classification, assembly location, and credit status for that exact vehicle.
3. Check MSRP and class: Ensure the MSRP and the EPA vehicle class meet the applicable cap (car vs. SUV/truck/van).
4. Confirm battery capacity: Verify the battery is at least 7 kWh for a PHEV.
5. Assess your income eligibility: Compare your MAGI (current or prior year, whichever is lower) to the program limits.
6. Get the seller report: For 2024 and later, the dealer must submit a time-of-sale report to IRS and give you a copy—keep it with your records.
7. Decide on point-of-sale: If eligible, choose whether to transfer the credit to the dealer for an immediate price reduction.

Completing these checks before delivery helps you avoid surprises and ensures you capture all available incentives.

Claiming the credit: What paperwork you need

If you don’t transfer the credit at the dealership, you may still claim it on your return. Note that the new-vehicle credit is nonrefundable if claimed on your tax return, but a point-of-sale transfer provides the full value upfront even if you owe little or no tax.

Here’s what to prepare for filing or for your records:

• Form 8936: Used to claim the Clean Vehicle Credit (new or used) if not transferred at point-of-sale.
• Seller’s report: Required for both new and used credits (the dealer provides it and files with IRS starting in 2024).
• Purchase agreement and window sticker: To document MSRP, VIN, and vehicle classification.
• Income documentation: To confirm you meet MAGI limits, if applicable.
• Lease paperwork: If leasing, ensure any incentive pass-through is clearly reflected in the contract.

If you transfer the credit at purchase, the dealer’s IRS confirmation and your sales documents are generally sufficient; if not, keep all records and attach Form 8936 to your federal return.

Examples and caveats

Historically, U.S.-assembled plug-in models such as certain trims of the Jeep Wrangler 4xe and Grand Cherokee 4xe, Ford Escape PHEV, Lincoln Corsair Grand Touring, and Chrysler Pacifica PHEV have appeared on the qualified list at various times. However, eligibility can change without notice due to supply-chain shifts and evolving rules—especially with 2024–2025 FEOC restrictions—so always verify the specific VIN on official sites before purchase.

Summary

Only plug-in hybrids (PHEVs) can qualify for federal tax incentives; conventional hybrids do not. New PHEVs may be eligible for up to $7,500 if they meet North American assembly, price, income, and battery-sourcing requirements that are stricter in 2024–2025. Used PHEVs can qualify for up to $4,000 with simpler rules, and leases often benefit from a separate commercial credit that dealers can pass through. Because model eligibility changes, confirm the exact vehicle and VIN on fueleconomy.gov or irs.gov before you buy, and check your state and utility for stackable incentives.

How do I claim my $7500 hybrid tax credit?

Use Form 8936 to claim either the Qualified Plug-In Electric Drive Motor Vehicle Credit or the new Clean Vehicle Credit. The Qualified Plug-In Electric Drive Motor Vehicle Credit and the new Clean Vehicle Credit are each worth up to $7,500.

Can you get a tax write-off for a hybrid?

Some all-electric and plug-in hybrid vehicles qualify for a $3,700 to $7,500 federal tax credit. Many states also offer additional incentives for purchasing new EVs. Find tax credits and incentives in your state.

Which cars qualify for the $7500 EV tax credit?

Which EVs and PHEVs Are Eligible for a Federal Tax Credit?

Model Year/Vehicle	Credit Available	Retail Price Cap
2023-25 Ford F-150 Lightning EV	$7,500	$80,000
2026 Genesis Electrified GV70 EV	$7,500	$80,000
2026 GMC Sierra EV	$7,500	$80,000
2024-26 Honda Prologue EV	$7,500	$80,000

Does the 2025 Toyota RAV4 hybrid qualify for tax credits?

No, the standard 2025 Toyota RAV4 Hybrid does not qualify for the federal clean vehicle tax credit because it is not a plug-in hybrid vehicle (PHEV). The credit is reserved for fully electric vehicles and plug-in hybrids that meet specific requirements, such as battery sourcing, final assembly location in North America, and sale price. 
Why the RAV4 Hybrid doesn’t qualify: 

• Not a plug-in vehicle: Opens in new tabA standard RAV4 Hybrid relies on both its gasoline engine and electric motor but cannot be plugged in to charge a battery for extended electric-only driving, unlike a PHEV.
• Focus on plug-in hybrids: Opens in new tabThe federal tax credit program is for plug-in hybrids and full EVs, not conventional hybrids.

What about the RAV4 Prime?

• The 2025 Toyota RAV4 Plug-in Hybrid (formerly RAV4 Prime) is the version that may qualify for federal incentives. 
• To qualify, the PHEV must meet all the requirements for the credit, including battery component and critical mineral sourcing rules, and must have been assembled in North America. 

To check for eligibility:

• Confirm the model: Verify if the model you are interested in is the standard RAV4 Hybrid or the Plug-in Hybrid version. 
• Check for VIN: Look for a VIN that indicates final assembly occurred in the United States, according to Edmunds. 
• Use the official IRS website: The IRS website is the best source for the most up-to-date information on qualifying vehicles and the credit requirements, as the rules on battery sourcing and final assembly are complex and change annually.