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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 mission is to help you make smarter financial decisions by offering interactive financial calculators and tools as well as publishing informative and original content, by enabling users to conduct research and analyze information at no cost – so you can make your financial decisions with confidence. Bankrate has partnerships with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site come from companies who pay us. This compensation can affect the way and when products are featured on this website, for example, for example, the order in which they may appear within the listing categories in the event that they are not permitted by law. This applies to our loan products, such as mortgages and home equity, and other home loan products. However, this compensation will not influence the information we provide, or the reviews that you see on this site. We do not contain the vast array of companies or financial offers that may be accessible 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 in navigating the details of borrowing money to buy cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers gain confidence to take control of their finances by providing precise, well-studied facts that break down complicated topics into bite-sized pieces. The Bankrate promises
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There are money-related questions. Bankrate has the answers. Our experts have been helping you manage your finances for more than four years. We continually strive to give consumers the professional advice and tools required to make it through life’s financial journey. Bankrate adheres to a strict code of conduct , so you can trust that our information is trustworthy and precise. Our award-winning editors, reporters and editors provide honest and trustworthy content that will help you make the right financial choices. Our content produced by our editorial staff is factual, objective and uninfluenced through our sponsors. We’re honest about how we are in a position to provide quality content, competitive rates and useful tools for you , 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 placement of sponsored products or services, or when you click on certain hyperlinks on our site. So, this compensation can impact how, where and when products appear in listing categories and categories, unless it is prohibited by law. This is the case for our mortgage, home equity and other home loan products. Other elements, such as our own website rules and whether or not a product is available in the area you reside in or is within your personal credit score may also influence how and where products appear on this site. We strive to provide an array of offers, Bankrate does not include information about each credit or financial item or product. Driving electric is no longer exclusive to car owners. It is now a reality for all types of people. EV market has experienced dramatic growth over the past few years, with registrations growing to 60 percent by 2022, as per . However the options for electric vehicles continue to expand and include a wide selection of styles, and price points. Additionally, electric vehicles come with numerous benefits for saving money. Besides the obvious — saving on the cost of gas , there are tax credits for buyers of vehicles powered by electricity. Depending on your home state, owning an electric vehicle could save you thousands. What is an EV tax credits? It is the EV tax credit can be described as a financial incentive provided by the federal government to let you earn money from the back an amount of credit, which can be as high as $7,500, if you purchase an eligible electric vehicle. Statistics on Electric Cars The easiest way to see how much the market has grown is to take a look at the most recent . Seven percent or less of overall light-duty sales as of the third quarter of 2022 comprised electric vehicles. ( ) California has the most new EV registrations at the time of the end of December 2021, at around 39 percent. ( ) By the end of 2021, there were 16.5 million electric vehicles on the road. ( ) Nearly half of Americans are interested in buying or leasing an electric vehicle, up 10 percent from last year. ( ) California has the most charging stations with 14,463, which is followed by New York, Florida and Texas. ( ) Tesla is the most popular electric vehicle among American customers. ( ) Fifty-three percent of those who aren’t interested in EVs worry of the inconvenience that comes with vehicle charging. ( ) Gen Z are the earliest adopters of electric vehicles and 32 percent have indicated they would like to purchase one within the next three years. ( ) Tesla made up the majority of EV registrations in the first part of 2022. ( ) Fifty-nine percent of people are likely to buy an EV ( ).
EV tax credit eligibility requirements EV tax credit was a Federal incentive designed in order to encourage people to purchase an electric vehicle. This isn’t a check you receive upon completing an automobile purchase and is instead an amount of tax credit that can range from to $7500 that you will be eligible to receive. This tax credit is applicable to all plug-in and electric vehicles, but specific credits are available on the U.S. Department of Energy’s website . What criteria to be considered for qualifying based on the age of your vehicle and the available incentives, your vehicle has to meet certain criteria. If your vehicle was purchased in 2022 or before it was purchased within the last 12 months of December 31, 2009. It must be a brand new vehicle that is not being used. The vehicle must be purchased and not leased. Have a weight rating of between 14,000 and 14000 pounds. The battery must have a capacity of at minimum four kilowatt per hour (kWh). It is intended for use exclusively for use in the United States. For your own usage, not to be sold. Utilize an external recharge source. If the vehicle you purchased was bought in 2023 or the following year: Purchase the battery for your personal usage, not for resales. It is used primarily for use in the U.S. Have a battery capacity of at least 7 kWh. A vehicle’s gross weight rating of less than 14000 pounds. The vehicle must be manufactured by a . Final assembly will be completed in North America. MSRP less than $80,000 for vans or sport utility vehicles, pickup trucks and $55,000 for other types of vehicles. If your used vehicle was purchased in 2023 or after You must be an individual who bought the vehicle for use and not to resell. Be the owner of the vehicle at first. The vehicle cannot be claimed as a dependent on another person’s tax return. Not claimed another clean vehicle credit within the three years prior to the date of purchase. The price must be $25,000 or less. Have a model year at least two years earlier that the year when you purchase it. For example, a vehicle that you purchase in 2023 must have an model that was 2021 or more. Have not been transferred between the 16th of August, 2022 to a qualified buyer. Be a vehicle with a gross weight rating that is under 14,000 pounds. Be an eligible FCV or plug-in EV that has the capacity of a battery of seven kWh or less. It is intended for use exclusively inside the United States. It can be purchased from an agent. Tip for Bankrate
To determine where your car was built, type in your VIN (vehicle identification number) on the website. It is important to keep in mind that buying the car on its own does not guarantee that you will receive the tax credit. You must file an application with IRS.
Income and the EV tax credit Any driver who submits the required details for a qualifying vehicle using Form 8936 could be eligible for the EV tax credits. However, the amount your earn will affect the tax credits you receive. If you earn some amount that is greater than 300,000 for couples who file together, $225,000 for heads of households and $150,000 for all other taxpayers, you won’t qualify for tax credits. State and local EV tax incentives and tax credits There are many states that do not offers EV tax incentives and tax credits. In fact, more than half of the states do not have an EV tax incentive program. Before you head out to buy a charging station in your garage, think about how much you can save in your home state. EV tax credits based on vehicle manufacturer Here are some of the special EV tax credits that are offered by the various brands of vehicles. Just as each state differs in its tax incentives, you should consider the advantages of one vehicle brand to the other. Brand name of the vehicle
Credit available
Information collected from
Audi
Between $4,502 and $7,500
BMW
From $3,793 to $7500
Chevrolet
No longer eligible
Fiat/Chrysler
$7,500
Ford
$4,007 to $7,500
Honda
Between $3,626 and $7,500
Hyundai
$4,543 to $7,500
Jaguar/Land Rover
From $6,295 to $7,500
Kia
$4,543 to $7,500
Mercedes
Between $3,501 and $7,500
Mitsubishi
Between $5,836 and $7,500
Nissan
$7,500
Porsche
$3,667 to $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
Making the choice to purchase an electric vehicle is similar to buying a traditional gas car and deciding to venture into the world of buying an electric car involves weighing a variety of factors including cost, size and practicality. But purchasing an EV requires extra thought. Here are some questions you should consider before you decide to purchase you want to purchase an electric vehicle. Are there charging stations in my local area? Before you purchase an EV it is essential to confirm that there are available charging stations within your vicinity. Make use of resources like those provided through to explore options before buying. What’s the car’s range? It is important to ensure that the range of your new car fits your typical driving routine as well as any other trips you may be thinking of. What’s the anticipated maintenance of your vehicle? Although you’ll need to set aside some cash for service checks but you don’t need to worry about costs from oil changes or other emissions equipment. What is the cost of EV insurance? The price of EV insurance varies, so it is best to do some research and figure out the lender will best suit your needs. Find Bankrate’s advice on . Should I lease an electric vehicle? You might be in a position to get beneficial manufacturer incentives or if you would rather change your vehicle every couple of years. Do I need to buy a new car or used? Consider incentives available and your budget. The future of EV credit tax incentives Electric cars are still some of the most expensive cars currently available. And until they are made available and sold, they’ll likely remain at a steeper price point. But because manufacturers are making green vehicles an important priority, as well as the federal government trying to reward that with tax credits, it is likely that the tax credit will not disappear in the near future. And if you have been interested in going green for a while it’s the perfect time to take action. This is particularly true in light of President Biden’s executive order that stated that half of all new vehicles that are sold in the U.S. should be electric by 2030. While that is quite an increase of a significant percentage from today, you may benefit of the present surge in electric car options and also save some money by taking advantage of an available tax credit. 2022 Inflation Reduction Act Following months of deliberation and debate, the 755-page Inflation Reduction Act passed and was approved in the presence of President Biden on August. 16. It is designed to “fight inflation and to invest in manufacturing and energy production, and reduce carbon emissions by around 40 percent by 2030,” according to a . The new law will affect tens of millions of Americans and will encourage more motorists to go electric, and help reduce carbon emissions. The legislation on clean vehicles indicates that the same tax credit will be available to those who buy an EV however more strict requirements on the vehicle components may make finding a suitable EV challenging. The incentive can essentially be split into two parts. For a vehicle to qualify for the initial $3,750 amount and a specific proportion of the minerals that are utilized in its battery have to be extracted from the U.S. or a country that the U.S. shares a free trade agreement. The second portion of $7,500 is about the country where the components of the battery come from. Most battery components must be produced from the U.S., Canada or Mexico. The percentages required of crucial minerals will rise every year between 2024 and 2026, and until 2028 for all components. Additionally, the vehicles must be manufactured at North America. This poses a problem however, some manufacturers who no are offering incentives, like Tesla and GM, will be able to resume. The legislation removes the limit on the amount 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 major shift following this legislation concerns used EV credits for tax purposes. Drivers who aren’t in a position to buy a brand new EV are still eligible for the tax credit. If the vehicle costs up to $25,000, drivers can receive a tax credit of up to 30 % of the purchase price with a maximum of $4,000. Liz Najman, leader of policy research at , outlined the way the new legislation will impact car buyers. “Many people who buy cars in the U.S. can now receive up to $4,000 on a used EV that has a price less than the $25,000 threshold,” explains Najman. Additionally, a an analysis by the reporting agency found that “almost 20 percent of used EVs have a price which is eligible and that portion that is eligible for tax credits predicted to increase this year,” states Najman. “An optimistic early indicator,” says Najman, is that “already in January, around 50% of used cars tested by our agency would be eligible for some amount of money back.” So while it could appear that tax credits have limited access due to new legislation, says Najman, “in reality, the inclusion of used cars in tax credits has already expanded its reach and the breadth of drivers who are able to buy and drive an EV.” When will the new legislation go into effect?
New used vehicle incentive rules will be applicable to vehicles purchased after Dec. 31st, 2022. These regulations will expire on Dec. 31 2023.
The final word If you are considering buying new wheels is near look into purchasing an electric vehicle in order to tackle climate change . Additionally, you can take advantage of tax credits for electric vehicles and incentives. Before deciding on a particular EV be sure to do your homework and determine if there are tax credits still available. Also, examine the charging stations available in your region and in relation to how you’ll use the vehicle, verify the battery range of the vehicle you’re considering. When the time comes to find and evaluate rates and prices for purchasing EVs over conventional. Information on EV tax credits Do vehicles leased by the owner qualify for tax credits for electric vehicles? The federal tax credit will not apply to these . Instead, that money goes to the lender. However, this can still lower a monthly payment in the event that the leaser chooses to factor that incentive into your lease contract. You can mention this in order to try and save money.Certain states have incentives that are available regardless of whether you are leasing or purchasing. Will this federal EV tax credit always be available? The credit is likely to remain in place for a long time, particularly with increased pushes for more environmentally conscious vehicles. However, the number of vehicles that are available is constantly shifting due to the structure of tax credits.When the manufacturer of a specific model reaches the 200,000 electric vehicles that are sold for use throughout the United States, those vehicles are no longer qualified for tax credits. This is why it’s important to check whether the car you plan to buy is still eligible to be financed. Does a family be eligible for more than one EV credit tax deductions? When two people in the household buy electric vehicles for themselves and then claim credit for their own vehicles. If the two buy an EV together the credit can only be claimed one time.
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This article is written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the details of taking out loans to purchase 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 passionate about helping readers to control their finances through providing concise, well-researched and well-organized information that breaks down otherwise complex topics into manageable bites.
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