This paper examines the U.S. federal EV subsidy’s income cap, introduced under the 2022 Inflation Reduction Act, and its environmental and redistributive effects. First, using variation in exposure to the income-cap across ZIP-codes, I estimate that a 22-percentage-point drop in subsidy eligibility reduces EV registrations by 21 percent, implying a price elasticity of 4.5 for the marginal group. I develop an optimal-tax framework for income-capped subsidies and derive cap-conditional sufficient statistics for the jointly optimal per-unit subsidy and income cap. The optimal subsidy rate is larger when higher marginal external benefits coincide with greater price responsiveness, and when subsidy take-up is inversely related to income; the cap itself determines which households enter these moments. Calibrating a homothetic CES demand block, I trace an equity–environment frontier: as inequality aversion rises, the optimal cap tightens and the optimal subsidy falls; total environmental benefits decline, yet net fiscal efficiency can increase because inframarginal transfers are concentrated among high-income, high-adoption bins. The framework generalizes to other income-capped clean-energy programs and yields implementable rules for jointly choosing generosity and eligibility.