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 smarter financial decisions by providing you with interactive tools and financial calculators, publishing original and objective content. This allows you to conduct research and compare information at no cost – so you can make financial decisions without trepidation. Bankrate has agreements with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site are from companies who pay us. This compensation could affect how and when products are featured on the site, such as for instance, the order in which they may appear within the listing categories, except where prohibited by law for our loan products, such as mortgages and home equity, and other home lending products. This compensation, however, does not influence the information we publish, or the reviews that appear on this website. We do not contain the universe of companies or financial offerings that might be open to you. mseidelch/Getty Images
9 minutes read. Published 23rd January 2023
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers in navigating the ways and pitfalls of borrowing money to buy a car. 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 gain confidence to manage their finances by providing clear, well-researched facts that break down complex topics into manageable bites. The Bankrate promises
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If you have questions about money. Bankrate can help. Our experts have been helping you manage your finances for more than four decades. We continually strive to give consumers the professional advice and tools required to succeed throughout life’s financial journey. Bankrate follows a strict policy, which means you can be confident that our information is trustworthy and precise. Our award-winning editors, reporters and editors create honest and accurate content to help you make the right financial choices. The content created by our editorial staff is objective, factual and uninfluenced through our sponsors. We’re honest about the ways we’re able to bring quality content, competitive rates, and helpful tools to you , by describing how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated for the placement of sponsored products and, services, or through you clicking certain links posted on our site. Therefore, this compensation may influence the manner, place and in what order products appear within 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 factors, such as our own website rules and whether the product is available in the area you reside in or is within your personal credit score could also affect how and where products appear on this website. We strive to provide a wide range offers, Bankrate does not include information about every credit or financial product or service. Driving electric is no longer just for car buyers. It is now a reality for all types of people. EV market has experienced a massive growth over the past few years, with registrations growing by 60 percent throughout 2022, as per . However the options for electric vehicles are expanding and currently come in a range of designs, styles and prices. Additionally, electric vehicles come with numerous benefits for saving money. Apart from the obvious savings on gas , there are tax credits for buyers of the electric car. Based on the state you reside in having an electric car can save you thousands. What exactly is an EV tax credit? What is it? EV tax credit works as a financial incentive created by the government to allow you to earn cash from the back of a credit, up to $7,500, if you buy an electric vehicle that is qualified. Electric cars statistics The easiest way to see how much the market is growing is to take a look at the most the most recent . Just over 7 percent of overall light-duty sales as of the third quarter of 2022 was electric vehicles. ( ) California has the most new EV registrations as of the end of December 2021, with around 39 percent. ( ) At the end of 2021 there were about 16.5 million EVs in circulation. ( ) About half of Americans are interested in buying or leasing an EV increasing by 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 customers. ( ) fifty-three percent of people who are not interested in EVs worry of the inconvenience associated with charging their vehicle. ( ) Gen Z are the first to adopt electric vehicles with 32 percent indicating their desire to buy one in the coming three years. ( ) Tesla made up the majority of EV registrations during the first part of 2022. ( ) fifty-nine percent of customers are either extremely or somewhat likely to buy an electric vehicle ( ).
EV tax credit requirements The EV tax credit is a federal incentive built to encourage drivers to purchase an electric vehicle. This incentive is not a check you receive upon completing the purchase of a car and is instead an amount of tax credit that can range from to $7500 that you will be eligible to receive. This credit applies to all electric and plug-in automobiles, but exact credit amounts are available through the U.S. Department of Energy’s website . What criteria to be considered for qualifying based on the year of manufacture of your car, to qualify for available incentives, your vehicle must meet certain requirements. If the vehicle was purchased in 2022 or before it was purchased on or after December 31 in 2009. It must be a brand new vehicle that is not being used. It must be a new vehicle and not leased. The weight rating must be upwards of 14,000lbs. Hold a battery capacity of at minimum four Kilowatt hour (kWh). The battery is designed for use in the United States. Only for personal usage, not to be sold. Use an external plug-in recharge source. If your new vehicle was purchased in 2023 of the following year: Purchase the battery for your personal use, not for resale. Make use of it mostly for use in the U.S. You must have a battery capacity of at minimum seven kWh. Have a gross vehicle weight rating of less than 14000lbs. Be made by an . Undergo final assembly at North America. MSRP less than $80,000 for vans as well as sport utility vehicles and pickup trucks, and $55,000 for other vehicles. If the vehicle you are using was purchased in 2023 or earlier the date of purchase: You must be an individual who purchased the vehicle to use it and not for resale. Not be the original owner. It is not possible to claim as a dependent on another person’s tax return. Not claimed another clean vehicle credit in the last 3 years prior to the date of purchase. The price must be $25,000 or less. You must have a model year that is that is at least two years older than that of the calendar in which you purchase it. For instance, a vehicle that you purchase in 2023 must have a model year of 2021 or older. It must not have been transferred after the 16th of August, 2022, to a buyer who is qualified. Have a gross vehicle weight rating of under 14,000 pounds. You must be a FCV-compliant plug-in EV that has the capacity of a battery of at least seven kWh. It is intended for use exclusively within the United States. Be bought by a dealer. Bankrate tip
To determine where your car was assembled, enter the VIN (vehicle identification number) on the website. It is also crucial to note that purchasing the vehicle on its own will not ensure that you get the tax credit. You must file with the IRS.
The tax credit for income and the EV credit Any motorist who submits the necessary information for a qualified vehicle by using Form 8936 may be eligible for an electric vehicle tax credit. However, the amount you earn can impact the tax credits you get. If you make an amount in excess of $30,000 for married couple filing together and $225,000 for heads of households and $150,000 for other taxpayers, you do not be eligible for tax credits. Local and state EV tax incentives and tax credits Unfortunately, not every state offers EV incentives and tax credits. In fact, over half the states in the country don’t have an EV tax credits program. Before you head out to buy the charging station you need for your garage, determine the amount you could save in your state. EV tax credits by vehicle manufacturer Here are some of the special EV tax credits provided by various vehicle brands. Like every state has its own unique tax system in its tax incentives, you should consider the advantages of one vehicle brand compared to another. Brand name of the vehicle
Available credit
Information obtained from
Audi
From $4,502 to $7,500
BMW
From $3,793 to $7500
Chevrolet
No longer eligible
Fiat/Chrysler
$7,500
Ford
From $4,007 to $7500
Honda
Between $3,626 and $7,500
Hyundai
$4,543 to $7,500
Jaguar/Land Rover
$6,295 to $7,500
Kia
From $4,543 to $7,500
Mercedes
Between $3,501 and $7,500
Mitsubishi
$5,836 to $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
From $4,585 to $7,500
Making the choice to purchase an electric vehicle is similar to buying a traditional gas vehicle and deciding to venture into the world of buying an electric car involves weighing a variety of factors including the cost, size and utility. But buying an EV needs extra consideration. Here are a few questions to consider before you decide to purchase an electric vehicle is right for you. Are there charging stations in my local area? Before you purchase an EV, it is important to confirm that there are available charging stations in your area. Use resources like those offered through to explore options before buying. What is the vehicle range? It is important to ensure that the new range fits your typical driving routine — and any trips you may be thinking of. What is the expected maintenance schedule for 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 replacement or other equipment for emissions. What’s the price of EV insurance? The price of EV insurance is variable, so you need to do some research and figure out the lender is the best fit for your requirements. Find Bankrate’s advice on . Should I lease an EV? You might be able to find favorable incentives from manufacturers or you’d rather replace your vehicle every couple of years. Should I purchase a brand new vehicle or used? Weigh available incentives and your budget. The future of EV Tax credits for electric vehicles remain some of the most expensive cars currently available. And until there are more produced and sold, they’ll likely remain at a steeper price point. However, since manufacturers are making green cars prioritizing green vehicles while the state is trying to reward them by offering tax credits, this tax credit will not disappear any time soon. And if you have been considering going green for a while, now might be a good time to act. This is especially the case following the executive order stating that half of all new vehicles sold within the U.S. should be electric by 2030. While that is quite an increase of a significant percentage from where you are today, you could be able to make the most of the current surge of electric vehicles and save extra money through an tax credit that is available. 2022 Inflation Reduction Act Following months of deliberation, the 755-page Inflation Reduction Act passed and was signed into law by Vice President Biden on Aug. 16. It is designed to “fight inflation and invest in domestic manufacturing and energy production, and reduce carbon emissions by roughly 40 percent in the next decade,” according to a . The new legislation will likely affect tens of millions of Americans and encourage more drivers to switch to electric vehicles and lower carbon emissions. The part of the legislation regarding clean vehicles suggests that the same $7,500 tax credit will be available to those who purchase an EV, but more strict requirements on the car’s components could make finding a suitable EV challenging. The tax credit can be split in two parts. To be eligible for the first $3,750, a certain proportion of the minerals that are utilized in its battery have to be extracted from the U.S. or a country with which the U.S. shares a free trade agreement. The second portion of $7,500 focuses on the location where the battery’s components originate from. The majority of battery components have to be produced within either the U.S., Canada or Mexico. The minimum percentage of critical minerals will increase each year , from 2024 to 2026, and until 2028 for the components. Furthermore, the cars must be manufactured in North America. Although this poses a challenge however, some manufacturers who no provide incentives, such as Tesla and GM are expected to resume. The law eliminates the limitation on the number of EVs sold. Previously, manufacturers that sold 200 vehicles could no longer be eligible to offer credits. Used EV tax credits Another major change that has occurred since the legislation was passed pertains to the use of EV credits for tax purposes. Drivers who aren’t able to afford a brand-new EV are still eligible for credits for tax. For purchases up to $25,000, buyers get a tax deduction of up to 30 % of the cost of purchase, with a limit of $4,000. Liz Najman, leader of policy research at , outlined how the new law affects buyers of cars. “Many automobile buyers across America are now eligible for rebates. U.S. can now receive up to $4,000 back for a used vehicle that has a price less than $25,000.” explains Najman. Additionally, a recent research from the agency’s report found that “almost 20 percent of used EVs are priced at a level that is eligible and that portion of the market is predicted to increase in the coming year,” says Najman. “An positive early sign,” says Najman, is that “already in January, approximately 50% of used cars checked with our would receive some money in return.” This means that while it could appear that tax credits have limited access due to recent legislation, according to Najman, “in reality, the inclusion of used car tax credits has already expanded its scope and the number of those who are able to purchase and drive an electric vehicle.” When will the new law take the market?
Updated used vehicle incentive regulations will be applicable to vehicles purchased after Dec. 31, 2022. These regulations will expire at the end of December. 31 2023.
The bottom line If you are considering buying new wheels is now upon you, consider buying a electric vehicle to help address climate change and benefit from EV tax credits and incentives. Before deciding on a particular EV, do your homework and find out if tax credits that are still available. It’s also important to investigate the availability of charging stations in your region and in relation to how you’ll use the vehicle, confirm the battery range of the vehicle you’re considering. It’s time to find and examine rates and different costs for buying EV instead of traditional. Questions about tax credits for electric vehicles Are leased cars eligible to receive an EV tax credit? The federal tax credit does not apply to these . Instead, the funds is paid to the leaser. But this still can reduce the monthly payments in the event that the lessor chooses to factor that incentive into your lease agreement. Mention this during to try saving money.Certain states offer incentives that are applicable regardless of whether you are leasing or purchasing. Do you think you see the Federal EV tax credit remain in use? The credit will likely remain for the foreseeable future, particularly when there is a push to make environmentally conscious vehicles. However, the number of vehicles that are available is continuously changing because of the phase-out structure of tax credits.When the manufacturer of a specific model reaches the 200,000 electric vehicles that are sold to be used in the United States, those vehicles are no longer eligible for credits. Due to this, it is important to determine whether the car you plan to buy is still eligible to be financed. Can a household receive more than one EV tax credit? If two members of the same household purchase electric vehicles for their own and then claim credit for their individual cars. If two people purchase an EV together the credit 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 ways and pitfalls of borrowing money to purchase an automobile. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are passionate about helping readers feel confident to take control of their finances by providing clear, well-researched details that cut otherwise complicated subjects into bite-sized pieces.
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