IRS Releases New American Made Vehicle Tax Break Rules

IRS releases new American-made vehicle tax break rules: what you need to know

The IRS released new guidance clarifying how the American-made vehicle tax break works for buyers and sellers. This affects electric and qualifying plug-in hybrid vehicles that may be eligible for the Clean Vehicle Credit of up to $7,500.

The guidance focuses on eligibility checks, required documentation and how dealers and buyers should verify claims at the point of sale. Below are the practical details you need to follow to avoid surprises when claiming the credit.

Why the IRS guidance matters

The law ties the credit to specific rules: final assembly in North America, component sourcing for batteries, price and income caps, and manufacturer certification. The IRS guidance explains acceptable documentation and steps for reasonable reliance by dealers and consumers.

That makes the difference between getting the tax break at the dealer at the time of sale or having to claim (or defend) it later on a tax return.

IRS releases new American-made vehicle tax break rules: key changes and clarifications

The guidance clarifies several practical points rather than rewriting the law. It provides examples of acceptable manufacturer statements, the role of VIN look-ups, and the evidence dealers must keep if they apply the credit at point of sale.

Important topics covered include:

• Which documents count as proof the vehicle qualifies (manufacturer certifications, VIN verification, official databases).
• How dealers can rely on manufacturer statements and when they must do further checks.
• Rules about battery mineral and component sourcing and acceptable labelling or supplier documentation.
• Consequences for incorrect claims and documentation retention requirements.

Who is affected by the new IRS guidance?

Consumers buying qualifying electric vehicles, dealers offering the credit at sale, and tax professionals advising clients are all affected. Manufacturers and importers are also impacted because the guidance affects the certificates and disclosures they must provide.

Small changes to paperwork and verification processes can change whether you get the credit immediately or need to claim it on your tax return.

How to check vehicle eligibility under the IRS rules

Follow these steps before you commit to a purchase or accept a dealer’s price that assumes the credit.

• Confirm final assembly: Ask the dealer for a manufacturer statement confirming final assembly in the United States, Canada, or Mexico.
• VIN verification: Use the manufacturer VIN lookup or the official government vehicle list to confirm eligibility. Save a screenshot or printed copy.
• Battery sourcing: Request documentation on battery critical minerals and component sourcing where applicable.
• Income and price limits: Confirm your modified adjusted gross income and the vehicle’s manufacturer suggested retail price do not exceed legal caps.

Documents to request from the dealer or manufacturer

Keep copies of the following items to support the credit claim:

• Manufacturer certification letter or written statement about assembly and battery sourcing.
• VIN look-up result from the manufacturer or government list.
• Sales contract showing price before credit and whether the credit was applied at point of sale.
• Any dealer or manufacturer correspondence relating to the credit.

Practical steps for buyers and dealers under the new IRS guidance

Buyers should confirm eligibility before signing and get written confirmation that the dealer will apply the credit at sale. Dealers should document their reasonable reliance on manufacturer statements to reduce audit risk.

Steps for both parties:

1. Request manufacturer VIN verification or a certificate of eligibility.
2. Save all electronic evidence and print copies to include with purchase paperwork.
3. If the dealer applies the credit at sale, confirm whether the credit is treated as a trade-in or a reduction to price and get it in writing.
4. If unsure, plan to claim the credit on your tax return and keep the documents for your files.

Common questions and quick answers

Can I get the credit at the dealer or only on my tax return?

Many dealers will apply the credit at point of sale if they can reasonably rely on manufacturer documentation. If a dealer will not apply it, you can claim it on your tax return provided you and the vehicle meet the requirements.

What happens if a vehicle later turns out to be ineligible?

If the IRS audits the claim and the vehicle is found ineligible, the taxpayer or dealer may need to repay the credit and could face penalties. Proper documentation is the best defense.

Small real-world example

Case study: Sarah bought a 2025 electric compact SUV from a U.S. dealer. Before signing, she asked for the manufacturer VIN verification and a one-page statement saying final assembly took place in the U.S. The dealer applied the $7,500 credit at sale and saved the verification documents in the transaction file. When Sarah filed her taxes she included copies of the VIN verification and the purchase contract. No additional follow-up was required.

Final checklist before claiming the credit

• Confirm final assembly location and save the manufacturer statement.
• Run and save a VIN eligibility check from the official resources.
• Document battery sourcing information when available.
• Verify your income and the vehicle price are within limits for the year of purchase.
• Keep all paperwork for several years in case of an IRS review.

The IRS guidance is mainly about paperwork and proof. If you or your dealer follow the steps above, you will be in a much stronger position to claim the American-made vehicle tax break or to receive it at the point of sale.