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EV tax credit: What to know before you buy Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by providing you with interactive financial calculators and tools as well as publishing informative and original content. This allows you to conduct your own research and compare information without cost, so that you can make financial decisions with confidence. Bankrate has partnerships with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site come from companies that pay us. This compensation may impact how and where products appear on the site, such as such things as the sequence in which they appear in the listing categories and other categories, unless prohibited by law. This applies to our loans, mortgages, and other home loan products. However, this compensation will not influence the information we publish, or the reviews you see on this site. We do not cover the entire universe of businesses or financial offers that may be open to you. mseidelch/Getty Images
9 min read published 23rd January 2023
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers with the details of borrowing money to buy cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping readers gain confidence to manage their finances through providing clear, well-researched information that breaks down otherwise complicated topics into bite-sized pieces. The Bankrate guarantee
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If you have questions about money. Bankrate has the answers. Our experts have been helping you master your money for over four years. We are constantly striving to give our customers the right guidance and the tools necessary to be successful throughout their financial journey. Bankrate adheres to strict standards standard of conduct, so you can rest assured that our content is honest and precise. Our award-winning editors, reporters and editors create honest and accurate content that will help you make the right financial choices. Our content produced by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent regarding how we’re able to bring quality content, competitive rates, and helpful tools to our customers by describing how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the promotion of sponsored goods andservices or through you clicking certain hyperlinks on our site. Therefore, this compensation may affect the way, location and in what order items are listed in the event that they are not permitted by law for our mortgage home equity, mortgage and other products for home loans. Other elements, such as our own proprietary website rules and whether or not a product is offered in your area or at your self-selected credit score range could also affect the manner in which products are featured on this website. While we strive to provide an array of offers, Bankrate does not include information about each credit or financial product or service. Electric vehicles are no longer only for those who own cars. The EV market has experienced dramatic growth in the last few years, with registrations growing by 60 percent throughout 2022, according to . At the same time, electric vehicle options continue to expand and include a wide selection of styles, and pricing. Also, it comes with a variety of benefits for saving money. In addition to the obvious saving on the cost of gas , there are electric car tax credits available to buyers of vehicles powered by electricity. Depending on your home state, owning an electric vehicle can save you thousands. What is an EV tax credits? It is the EV tax credit works as a financial incentive provided by the government that will let you earn money back in the form a credit, up to $7,500, when you purchase a qualified electric vehicle. Statistics on electric cars The easiest method of determining how the market has grown is to look at recent . Seven percent or less of the total light-duty vehicle sales as of 30th of March 2022 were electric vehicles. ( ) California has the most new EV registrations as of the end of December 2021, with approximately 39 percent. ( ) At the end of 2021 there were about 16.5 million electric vehicles in circulation. ( ) Nearly half of Americans are considering buying or leasing an EV increasing by 10 percent from the previous year. ( ) California has the largest number of charging stations, with 14,463. followed by New York, Florida and Texas. ( ) Tesla is the most popular electric car among American consumers. ( ) 53 percent of those who aren’t interested in EVs are concerned about the hassle associated with charging their vehicle. ( ) Gen Z are the first users of electric vehicles and 32 percent have indicated they would like to purchase one in the coming three years. ( ) Tesla made up the majority of EV registrations in the first half of 2022. ( ) Five-thirty-nine percent consumers are somewhat or extremely likely to purchase an EV ( ).
EV tax credit requirements EV tax credits are a government incentive designed to encourage drivers to purchase the electric car. The incentive isn’t the kind of check you get in the mail following a vehicle purchase instead, it’s a tax credit worth up to $7,500 that you become eligible to receive. This tax credit is applicable to all plug-in or electric vehicles, however specific credit amounts can be found through the U.S. Department of Energy’s website . What criteria to be considered for qualifying based on the age of your vehicle, to qualify for available incentives, your vehicle must meet certain specifications. If you purchased your car in 2022 or before the date of purchase, it must be purchased on or on or after December 31 in 2009. Must be a new vehicle, not used. Must be a purchased vehicle, not leased. Have a weight rating of between 14,000 and 14000 pounds. Have a battery capacity of at minimum four Kilowatt hour (kWh). The battery is designed for use for use in the United States. Only for personal usage, not to be sold. Make use of an external recharge source. If your new vehicle was bought in 2023 or after: Buy it for your own use, not for resale. Use it primarily for use in the U.S. The battery must have a capacity of at least seven kWh. You must have a vehicle weight rating of no more than 14000lbs. Be made by a . Final assembly will be completed in North America. MSRPs below $80,000 for vans as well as sport utility vehicles and pickup trucks. $55,000 is the limit for all other vehicles. If your vehicle was purchased in 2023 or earlier: Be an individual who purchased the vehicle for use and not to resell. Be the owner of the vehicle at first. It is not possible to claim as an dependent on someone else’s tax return. Have not claimed a used clean vehicle credit in the last 3 years prior to the purchase date. You must have a purchase price of less than $25,000. You must have a model year that is at least two years earlier that the year in which you purchase it. For instance, a car that you purchase in 2023 must have to have a model year 2021 or later. Not have already been transferred between august 16, 2022, to a buyer who is qualified. Be a vehicle with a gross weight rating of not more than 14,000lbs. Have a valid FCV or plug-in electric vehicle with a battery capacity of seven kWh or less. The battery must be used primarily inside the United States. It can be purchased by an authorized dealer. Tip for Bankrate
To locate where your vehicle was made, simply enter your VIN (vehicle identification number) on ‘s website. It is also crucial to keep in mind that buying the car on its own does not ensure that you get the tax credit. You must file your tax return with IRS.
Income and the EV tax credit Any motorist who submits the required details for a qualifying vehicle using Form 8936 might be qualified to receive an electric vehicle tax credit. However, the amount you make can affect what tax credits you get. If you make an amount in excess of $30,000 for married couple filing jointly and 225,000 for head of household and $150,000 for all other taxpayers, you won’t be eligible to receive tax credit. Local and state EV tax incentives and tax credits Unfortunately, not every state provides EV tax credits and incentives. In fact, over half the states in the country do not offer an EV tax incentive program. Therefore, prior to setting out to purchase a charging station in your garage, think about how much you can save in your state. EV tax credits based on vehicle brand Here are a few particular EV tax credits provided by the various brands of vehicles. As with every state in its tax incentives, you should consider the advantages of one vehicle brand compared to the other. The brand name of your vehicle
Credit is available
Information obtained from
Audi
Between $4,502 and $7,500
BMW
$3,793 to $7,500
Chevrolet
No longer eligible
Fiat/Chrysler
$7,500
Ford
$4,007 to $7,500
Honda
$3,626 to $7,500
Hyundai
$4,543 to $7,500
Jaguar/Land Rover
From $6,295 to $7,500
Kia
$4,543 to $7,500
Mercedes
From $3,501 to $7,500
Mitsubishi
Between $5,836 and $7,500
Nissan
$7,500
Porsche
Between $3,667 and $7,500
Subaru
From $4,502 to $7,500
Tesla
No longer eligible
Toyota
Between $2,500 and $7,500
Volkswagen
$7,500
Volvo
$4,585 to $7,500
The decision to purchase an electric vehicle, just like purchasing a gas-powered vehicle, deciding to dive into the world of buying an electric vehicle requires questioning several factors, like cost, size and practicality. However, buying an EV requires extra thought. Here are a few questions to ask yourself before deciding whether you want to purchase an electric vehicle is right for you. Are there charging stations in my region? Before you purchase an EV it is essential to confirm that there are available charging stations in your region. Use resources like those offered through to look into options before purchasing. What is the vehicle range? You’ll need to verify that the new range is compatible with your normal driving habits — and any trips you might be planning. What’s the planned vehicle maintenance? While you’ll have to save some money to pay for checks on service but you don’t need to worry about costs from oil adjustments or other emission equipment. How much is EV insurance? The price of EV insurance varies, so it is best to investigate and find out which lender fits best with your needs. Take a look at Bankrate’s guide . Do I need to lease an electric vehicle? You might be capable of obtaining advantageous incentives from the manufacturer or you would rather change your car every couple of years. Should I buy new or used? Consider incentives available and your budget. The future of credit tax incentives Electric cars remain one of the most expensive vehicles currently available. And until more are produced in the near future, they’ll remain at a steeper price point. But because manufacturers are making green cars a priority and the government is looking to encourage that with tax credits, it is likely that the tax credit will not be vanishing any time soon. If you’ve been considering going green for a while, now might be an ideal time to start. This is especially the case following the executive order which stated that 50% of all new vehicles that are sold in the U.S. should be electric in 2030. Although that’s an increase of a significant percentage from the present, you might be able to take advantage of the current influx of electric vehicles and save money with an available tax credit. 2022 Inflation Reduction Act Following months of deliberation, the 755-page Inflation Reduction Act passed and was adopted in the presence of President Biden on August. 16. It is designed to “fight inflation, invest in domestic manufacturing and energy production, and cut carbon emissions by roughly 40 percent in the next decade,” according to a . The new law will affect tens of millions of Americans and will encourage more motorists to buy electric and reduce carbon emissions. The section of the law concerning clean vehicles states that the same $7,500 tax credit is available to those who purchase an EV however more strict requirements on the car’s components could make locating a qualified EV challenging. The incentive can essentially be split into two parts. To be eligible for the first $3,750, a certain percentage of critical minerals that are used in the battery must be mined in the U.S. or a country with which the U.S. shares a free trade agreement. The second part of $7,500 involves the country where the components of the battery come from. Most battery components must be manufactured from Canada, the U.S., Canada or Mexico. The minimum percentage of critical minerals will increase each year from 2024 to 2026, and will continue until 2028 for components. Additionally, the vehicles must be manufactured in North America. This poses a problem, many manufacturers that no are offering incentives, like Tesla and GM will be able to return. The law eliminates the limitation on the number of EVs sold. In the past, companies that sold more than 200,000 vehicles would not be able to offer credits. Used EV tax credits Another significant shift that this law has brought about pertains to used EV credits for tax purposes. Drivers who may not be able to afford a brand-new EV may still be eligible for credits for tax. For purchases up to $25,000, buyers get a tax deduction of up to 30 percent of the purchase price with a maximum of $4,000. Liz Najman, leader of policy research at , explained the way the new legislation affects buyers of cars. “Many people who buy cars in America are now eligible for rebates. U.S. can now receive up to $4,000 back on used electric vehicles when the purchase price is less than $25,000,” states Najman. In addition, a recent research from the agency’s report revealed that “almost 20% of used EVs have a price that would be eligible, and that portion in the marketplace is likely to expand this season,” states Najman. “An positive early sign,” says Najman, is that “already in January, around 50% of used cars checked with our would receive some money in return.” While it may seem like tax credits have a limited access due to new legislation, says Najman, “in reality, the introduction of used car tax credits is already expanding its scope and the number of drivers who are able to purchase and drive an electric vehicle.” When will the new law take effect?
New used vehicle incentive rules will be applicable to vehicles purchased after Dec. 31, 2022 and expire on Dec. 31 2023.
The bottom line If the time to buy a new set of wheels is near, consider buying a electric vehicle to help address climate change and get tax credits for electric vehicles and incentives. Before making a decision on an EV be sure to do your homework and determine if there are tax credits available. It’s also important to look into the charging stations available in your area and in relation to how you plan to use the vehicle, confirm the battery range of the vehicle you’re considering. When the time comes to search for and compare rates and differing prices for purchasing EVs over conventional. Questions about tax credits for electric vehicles Are leased cars eligible to receive an EV tax credit? The federal tax credit will not apply to leased vehicles . Instead, that money goes to the lender. This can, however, lower a monthly payment — if the lessor decides to include the incentive into your lease agreement. You can mention this in order to try and save money.Certain states offer incentives that are applicable regardless of whether you are leasing or purchasing. What happens to the federal EV tax credit be around? The credit is likely to be around indefinitely, especially when there is a push to make climate-aware vehicles. But the available vehicles are constantly shifting due to the phase-out structure of tax credits.When an individual manufacturer has reached the 200,000 electric vehicles that are sold to be used throughout the United States, those vehicles cannot be qualified for tax credits. Due to this, it’s crucial to verify whether the car you want to buy is still eligible to be financed. Does a family be eligible for more than one EV credit tax deductions? If two members of the same household buy electric automobiles for themselves each, they are able to claim credit for their own vehicles. If two people purchase an EV together it can only be claimed once.
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers with the ins and outs of securely borrowing money to buy cars. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are committed to helping readers feel confident to control their finances through providing clear, well-researched information that breaks down otherwise complex topics into manageable bites.
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