EV tax credit: What to know before you buy Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by offering interactive financial calculators and tools that provide objective and unique content. This allows you to conduct your own research and compare data for free – so that you can make decisions about your finances without trepidation. Bankrate has agreements with issuers, including but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make Money The deals that are displayed on this site come from companies that compensate us. This compensation can affect the way and when products are featured on the site, such as such things as the order in which they appear within the listing categories in the event that they are not permitted by law. This applies to our mortgage, home equity and other home loan products. But this compensation does affect the information we provide, or the reviews you see on this site. We do not contain the entire universe of businesses or financial offers that may be open to you. mseidelch/Getty Images
9 min read Published January 23, 2023
Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers in navigating the ins and outs of securely borrowing money to buy cars. Written 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 gain confidence to control their finances through providing precise, well-studied information that breaks down complex topics into manageable bites. The Bankrate promises
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There are money-related questions. Bankrate has the answers. Our experts have helped you understand your money for more than four years. We strive to continuously give consumers the professional guidance and the tools necessary to be successful throughout their financial journey. Bankrate adheres to strict standards , so you can trust that our information is trustworthy and accurate. Our award-winning editors, reporters and editors create honest and accurate content to help you make the right financial decisions. The content we create by our editorial staff is objective, truthful and uninfluenced from our advertising. We’re transparent about how we are able to bring quality information, competitive rates and useful tools for you by explaining how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products and, services, or when you click on certain links posted on our site. So, this compensation can impact how, where and in what order items appear within listing categories, except where prohibited 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 a product is available in your region or within your personal credit score can also impact the way and place products are listed on this website. We strive to provide an array of offers, Bankrate does not include details about each credit or financial item or product. Electric vehicles are no longer only for those who own cars. In fact, the EV market has experienced dramatic expansion over the last couple of years, with registrations increasing to 60 percent by 2022, according to . However electric vehicle options continue to diversify and now include a wide selection of designs and pricing. Also, it comes with a variety of money-saving perks. Apart from the obvious savings on gasoline, there are tax credits for buyers of vehicles powered by electricity. Depending on your home state the electric car you own could save you thousands. What exactly is the EV tax credits? It is the EV tax credit can be described as a tax incentive built by the government that will allow you to earn cash from the back credits, up to $7,500, if you purchase a qualified electric vehicle. Statistics on Electric Cars The most straightforward method to determine how the market is growing is to take a look at the most the most recent . About 7 percent of all light-duty sales in the 3rd quarter in 2022 were electric vehicles. ( ) California has the highest percentage of new EV registrations on the end of December 2021 at around 39 percent. ( ) By the end of 2021, there would be 16.5 million EVs driving around. ( ) Around 50% of Americans are considering buying or leasing an electric vehicle, up 10 percent from last year. ( ) California has the highest 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 people who are not interested in EVs fear the inconvenience of charging their vehicles. ( ) Gen Z are the first users of electric vehicles, with 32 percent noting their interest in buying one within the next three years. ( ) Tesla made up 70% of all EV registrations in the first second quarter of 2022. ( ) Fifty-nine percent of people are likely to purchase an EV ( ).
EV tax credit eligibility requirements EV tax credit was a Federal incentive created to encourage drivers to purchase vehicles powered by electricity. The incentive isn’t a check you receive upon completing a vehicle purchase and is instead a tax credit worth up to $7,500 that you become eligible to receive. The credit is available to all plug-in or electric automobiles, but exact credits are available through the U.S. Department of Energy’s website . How to qualify Depending on the condition of your vehicle, to qualify for available incentives, your vehicle must meet certain requirements. If your vehicle was purchased in 2022 or before: Have been purchased after December 31, 2009. The vehicle must be brand new that is not being used. It must be a new vehicle that is not leasing. It must weigh up to 14,000 pounds. The battery must have a capacity of at least 4 kilowatt per hour (kWh). Be for use primarily within the United States. Only for personal usage, not to be sold. Utilize an external recharge source. If your new vehicle was bought in 2023 or after: Buy the battery for your personal useand not to resell. Use it primarily for use in the U.S. Have a battery capacity of at least seven kWh. Have a gross vehicle weight of less than 14000lbs. It must be made by an . Final assembly will be completed within North America. MSRP below $80,000 for vans as well as sport utility vehicles and pickup trucks, and $55,000 for other vehicles. If your vehicle was bought in 2023 or earlier: Be an individual who bought the vehicle for use and not for resale. You must not be the original owner. The vehicle cannot be claimed as dependent on another’s tax return. Not have claimed another used credit for a clean vehicle in the 3 years before the purchase date. You must have a purchase price of $25,000 or less. Have a model year that is at least two years older than the calendar year when you buy it. For example, a vehicle purchased in 2023 would need an model that was 2021 or more. Have not been transferred prior to August 16, 2022 to a buyer who is qualified. Have a gross vehicle weight of less than 14,000 pounds. You must be a FCV-compliant plug-in electric vehicle with an energy capacity of seven kWh or less. Be for use primarily within the United States. Purchased through an agent. Tip for Bankrate
To locate where your vehicle was made, simply enter your VIN (vehicle identification number) on the website. It is also crucial to keep in mind that buying the vehicle alone does not guarantee that you will receive your tax credits. It is necessary to file a tax return an application with IRS.
Income and the EV tax credit Any motorist who submits the required information for a qualifying vehicle using Form 8936 may be eligible for the EV tax credits. However, the amount you earn can impact the tax credits you get. If you make a certain amount of money that is greater than $30,000 for married couple filing jointly or $225,000 for heads of household and $150,000 for all other filers, you will not qualify to receive tax credit. State and local EV incentives and tax credits However, not every state provides EV tax incentives and tax credits. In fact, over half of the states in the United States do not have any EV tax credit program. Before you head out to buy a charging station for your garage, determine how much you could save in your home state. EV tax credits for vehicles manufacturer Here are some of the particular EV tax credits offered by the various brands of vehicles. Like every state has its own unique tax system and offers different benefits, think about the benefits of one vehicle brand compared to another. Brand name of the vehicle
Available credit
Information obtained from
Audi
$4,502 to $7,500
BMW
Between $3,793 and $7,500
Chevrolet
No longer eligible
Fiat/Chrysler
$7,500
Ford
Between $4,007 and $7,500
Honda
Between $3,626 and $7,500
Hyundai
From $4,543 to $7,500
Jaguar/Land Rover
From $6,295 to $7,500
Kia
$4,543 to $7,500
Mercedes
$3,501 to $7,500
Mitsubishi
Between $5,836 and $7,500
Nissan
$7,500
Porsche
Between $3,667 and $7,500
Subaru
Between $4,502 and $7,500
Tesla
No longer eligible
Toyota
From $2,500 to $7,500
Volkswagen
$7,500
Volvo
$4,585 to $7,500
Making the decision to buy an electric vehicle, just like buying a traditional gas vehicle and deciding to venture into the world of buying an electric vehicle involves weighing a variety of factors including price, size, and practicality. However, buying an EV takes extra consideration. Here are some questions you should consider before you decide to purchase you want to purchase an electric vehicle. Are charging facilities available in my area? Before deciding to purchase an EV it is crucial to verify that there are charging stations in your area. Make use of resources like those provided through to explore options before purchasing. What’s the range of your vehicle? You will need to confirm that your new vehicle’s range fits your typical driving routine as well as any other trips you’re thinking of. What is the expected vehicle maintenance? While you will need to save some money to cover service checks however, you will not have to worry about expenses from oil replacement or other equipment for emissions. How much is EV insurance? The cost of EV insurance varies, so it is best to investigate and find out the lender fits best with your needs. Check out Bankrate’s guide to . Should I lease an electric vehicle? You might be capable of obtaining favorable incentives from manufacturers or you prefer to change your car every couple of years. Do I need to buy a new car or used? Weigh available incentives and your budget. The future of EV Tax credits for electric vehicles are still some of the most expensive cars available, and until more are produced and sold, they’ll likely remain at a steeper price point. But because manufacturers are making green cars prioritizing green vehicles, as well as the federal government looking to reward that, the tax credit likely will not be vanishing anytime soon. And if you have been interested in going green for a while it’s a good time to act. This is especially the case following the executive order which stated that 50% of all new cars sold within the U.S. should be electric in 2030. While that is quite a steep percentage jump from the present, you might be able to make the most of the present surge in electric vehicles and save money with the tax credit available. 2022 Inflation Reduction Act Following months of deliberation and debate, the 755-page Inflation Reduction Act passed and was adopted by President Biden on August. 16. The legislation aims to “fight inflation, invest in domestic energy production and manufacturing and cut carbon emissions by around 40 percent by 2030,” according to a . The new law is likely to impact tens of million of Americans and will encourage more motorists to buy electric and reduce carbon emissions. The legislation regarding clean vehicles suggests that the same $7,500 tax credit will be available to those who purchase an EV however stricter requirements regarding the car’s components could make finding a qualifying EV difficult. The incentive is split in two parts. To be eligible for the first $3,750, a certain amount of essential minerals that are used in the battery must be extracted from the U.S. or a country that the U.S. shares a free trade agreement. The second part of $7,500 focuses on the location where the battery’s components originate from. Most components for batteries must be manufactured in either 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 the components. In addition, the vehicles have to be assembled at North America. Although this poses a challenge for some companies that do not are offering incentives, like Tesla and GM, will be able to resume. The law removes the restriction on the number of EVs sold. Previously, manufacturers that sold more than 200,000 vehicles would not be eligible to offer credit. Used EV tax credits A major change that has occurred since the legislation was passed concerns the use of EV tax credits. Drivers who aren’t in a position to buy a brand new EV are still eligible for the tax credit. For purchases up to $25,000, buyers can receive a tax credit that is up to 30 percent of the purchase price with a limit of $4,000. Liz Najman, leader of policy research at , outlined the way the new legislation affects car buyers. “Many car buyers within the U.S. can now receive up to $4,000 on used electric vehicles when the purchase price is less than $25,000.” says Najman. In addition, a an analysis by the agency that conducts the analysis found that “almost 20 percent of used EVs have a price that is eligible and that portion that is eligible for tax credits expected to grow in the coming calendar year” says Najman. “An positive early sign,” says Najman, is that “already in January, around 50% of used cars that were inspected by us would get some money in return.” While it may seem that tax credits are limited in access due to recent legislation, says Najman, “in reality, the introduction of used car tax credits has already expanded its coverage and the number of those who are able to own and operate an electric vehicle.” When will the new law take effect?
New used vehicle incentive rules will be applicable to vehicles purchased after December. 31st, 2022. They will end the year following on Dec. 31 2023.
The final word If the time to buy new wheels is upon you, consider buying a electric vehicle to combat the effects of climate change. You can also benefit from EV tax credits and incentives. Before deciding on a particular EV be sure to do your homework and determine if there are tax credits still available. It’s also essential to examine the availability of charging stations in your local area. Also, depending on how you plan to use the vehicle, check the battery range of the vehicle you’re considering. When it comes time to search for and evaluate rates and costs of buying an EV instead of traditional. Information on EV tax credits Do vehicles leased by the owner qualify to receive an EV tax credit? Tax credit for federal residents does not apply to leased vehicles . Instead, that money goes to the lender. However, this can still reduce the monthly payments in the event that the leaser decides to include the incentive into your lease contract. Mention this during to try for savings and you could save money.Certain states have incentives that are available regardless of whether you are leasing or purchasing. What happens to this federal EV tax credit always be around? It is likely that the credit will be around indefinitely, especially due to the increased demand for environmentally conscious vehicles. However, the vehicles available are always changing due to the phase-out system 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 in the range of credits. This is why it’s important to check whether the car you plan to purchase is still available for credit. Can a household receive more than one EV tax credit? If two members of the same household purchase electric automobiles for themselves each, they are able to claim the credit for their own vehicles. If two people purchase an EV together the credit can only be claimed once.
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The article was written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers with the details of borrowing money to buy a car. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are passionate about helping readers to take control of their finances through providing concise, well-researched and well-organized details that cut otherwise complicated topics into digestible pieces.
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