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 offering interactive financial calculators and tools as well as publishing informative and original content. We also allow users to conduct research and analyze information without cost, so that you can make decisions about your finances without trepidation. Bankrate has partnerships with issuers, including but not restricted to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Make money The products that appear on this site are from companies who pay us. This compensation may impact how and when products are featured on this website, for example for instance, the order in which they be listed within the categories of listing, except where prohibited by law. This applies to our loan products, such as mortgages and home equity, and other products for home loans. This compensation, however, does affect the information we publish, or the reviews you see on this site. We do not cover the vast array of companies or financial offers that may be open to you. mseidelch/Getty Images
9 minutes read. Published on January 23, 2023.
Authored by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers in navigating the ways and pitfalls of borrowing money to buy an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to control their finances by providing clear, well-researched information that breaks down complicated topics into bite-sized pieces. The Bankrate guarantee
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There are money-related questions. Bankrate has answers. Our experts have been helping you manage your money for over four years. We are constantly striving to give consumers the professional advice and tools required to make it through life’s financial journey. Bankrate adheres to strict standards policy, which means you can be confident that our information is trustworthy and precise. Our award-winning editors, reporters and editors produce honest and reliable content to help you make the right financial decisions. The content we create by our editorial staff is factual, objective, and not influenced through our sponsors. We’re open about how we are capable of bringing high-quality information, competitive rates and helpful tools to you by explaining how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated for the placement of sponsored products or services, or when you click on certain links posted on our website. Therefore, this compensation may influence the manner, place and when products appear within listing categories and categories, unless it is prohibited by law for our mortgage, home equity and other products for home loans. Other factors, such as our own rules for our website and whether a product is available within the area you reside in or is within your personal credit score could also affect the way and place products are listed on this site. While we strive to provide the most diverse selection of products, Bankrate does not include the details of each credit or financial product or service. Electric vehicles are no longer just for car buyers. It is now a reality for all types of people. EV market has seen a dramatic growth in the last few years, with registrations increasing to 60 percent by 2022, as per . In the meantime electric vehicle options continue to diversify and now come in a range of styles, and prices. Additionally, electric vehicles come with numerous money-saving perks. Apart from the obvious savings on gasoline, there are also tax credits available to people who buy the electric car. Based on the state you reside in, owning an electric vehicle can save you thousands. What exactly is the EV tax incentive? It is the EV tax credit works as a financial incentive created by the government that will allow you to earn money to repay in the shape of a credit, up to $7,500, if you buy an eligible electric vehicle. Statistics on Electric Cars The most straightforward way to see how much the market has expanded is to take a look at the most recent . About 7 percent of overall light-duty sales in the third quarter of 2022 comprised electric vehicles. ( ) California has the highest percentage of new EV registrations on the end of December 2021, with approximately 39 percent. ( ) At the end of 2021, there would be 16.5 million EVs in circulation. ( ) About fifty percent of Americans are interested in purchasing or leasing an EV which is up by 10 percent over last year. ( ) California has the most charging stations at 14,463, which is followed by New York, Florida and Texas. ( ) Tesla is the most popular electric vehicle among American customers. ( ) 53 percent of people who are not interested in EVs fear the inconvenience that comes with vehicle charging. ( ) Gen Z are the first to adopt electric vehicles with 32 percent indicating they would like to purchase one in the coming 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 requirements The EV tax credit was a Federal incentive built in order to encourage people to purchase an electric vehicle. This isn’t the kind of check you get after an automobile purchase instead, it’s the tax credit of up to $7500 that you will be eligible to receive. This credit applies to all electric and plug-in vehicles, however specific credit amounts can be found via the U.S. Department of Energy’s website . How to qualify Depending on the age of your vehicle and the available incentives, your vehicle has to meet certain criteria. If you purchased your car in 2022 or prior to the date of purchase, it must be purchased on or after December 31, 2009. The vehicle must be brand new that is not being used. Must be a purchased vehicle and not leasing. It must weigh upwards of 14,000lbs. Hold a battery capacity of at least 4 kilowatt hours (kWh). The battery is designed for use in the United States. For your own use, not for resale. Use an external plug-in recharge source. If your vehicle was purchased in 2023 or the following year: Purchase it for your own useand not to resell. It is used primarily for use in the U.S. The battery must have a capacity of at minimum seven kWh. A vehicle’s gross weight rating of no more than 14000 pounds. The vehicle must be manufactured by a . Finish assembly process within North America. MSRP below $80,000 for vans or sport utility vehicles, pickup trucks and $55,000 for other vehicles. If your vehicle was purchased in 2023 or later: Be an individual who bought the vehicle solely for use and not for resale. Not be the original owner. The vehicle cannot be claimed as dependent on another’s tax return. Not have claimed another used clean vehicle credit in the 3 years before the purchase date. You must have a purchase price of less than $25,000. You must have a model year that is at least 2 years earlier than that of the calendar at the time you buy it. For instance, a car bought in 2023 will require a model year of 2021 or older. Not have already been transferred between august 16, 2022, to a buyer who is qualified. Be a vehicle with a gross weight rating of less than 14,000 pounds. Have a valid FCV or plug-in EV that has a battery capacity of at least seven kWh. Be for use primarily within the United States. It can be purchased through a dealer. Bankrate tip
To determine where your car was built, type in the VIN (vehicle identification number) on the website. It is also crucial to keep in mind that buying the vehicle on its own will not ensure that you get the tax credit. You have to file with the IRS.
Taxes on income and the EV tax credit Any driver who submits the required details to qualify a vehicle on Form 8936 could be qualified to receive an EV tax credit. However, the amount you make can affect what tax credits you receive. If you earn a certain amount of money, more than $30,000 for married couple filing together, 225,000 for head of households and $150,000 for the rest of the taxpayers, you do not qualify to receive tax credit. State and local EV tax incentives and tax credits Unfortunately, not every state provides EV tax credits and incentives. In fact, more than half the states in the country do not offer an EV tax credits program. Before you head out to purchase the charging station you need for your garage, determine how much you could save in your home state. EV tax credits by vehicle manufacturer Here are some of the particular EV tax credits that are offered by vehicle brands. Just as each state differs, consider the benefits from one vehicle brand compared to another. Vehicle brand
Credit is available
Information gathered from
$4,502 to $7,500
$3,793 to $7,500
No longer eligible
$4,007 to $7,500
$3,626 to $7,500
Between $4,543 and $7,500
From $6,295 to $7,500
$4,543 to $7,500
Between $3,501 and $7,500
$5,836 to $7500
From $3,667 to $7500
From $4,502 to $7,500
No longer eligible
Between $2,500 and $7,500
$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 electric vehicle buying will require you to consider a number of aspects, like price, size, and practicality. But purchasing an EV needs extra consideration. Here are some questions to think about before you decide whether to buy you want to purchase an electric vehicle is right for you. Are there charging stations in my region? Before you decide to purchase an EV it is crucial to confirm that there are charging stations in your area. Use resources like those offered through to research options prior to purchasing. What is the vehicle range? You’ll need to verify that the new range fits your typical driving routine — and any trips you might be contemplating. What’s the planned maintenance of your vehicle? While you’ll have to save some money for service checks, you won’t have to worry about costs from oil adjustments or other emission equipment. What is the cost of EV insurance? The price of EV insurance is variable, so you need to investigate and find out the lender fits best with your requirements. Find Bankrate’s advice on . Should I lease an electric vehicle? You might be in a position to get favorable incentives from manufacturers or you would rather change your vehicle every couple of years. Should I buy new or used? Consider incentives available and your budget. The future of EV credit tax incentives Electric cars are one of the most expensive cars available, and until there are more produced, they will predictably stay at a higher cost. But because manufacturers are making green vehicles a priority as well as the federal government trying to reward that by offering tax credits, this tax credit won’t be disappearing in the near future. If you’ve been interested in becoming more environmentally friendly for a while, now might be the perfect time to take action. This is especially the case following President Biden’s executive order stating that half of all new cars sold across the U.S. should be electric in 2030. While this is an impressive percentage increase from where you are today, you could be able to make the most of the current influx of electric car options and also save some money by taking advantage of the tax credit available. 2022 Inflation Reduction Act Following months of debate, the 755-page Inflation Reduction Act passed and was approved in the presence of President Biden on Aug. 16. It is designed to “fight inflation and invest in domestic energy production and manufacturing and cut carbon emissions by around 40 percent by 2030,” according to a . The new law will impact tens of million of Americans and will encourage more motorists to switch to electric vehicles and lower carbon emissions. The section of the law on clean vehicles indicates that the same $7,500 tax credit will be offered to buyers who buy an EV however, stricter requirements regarding the components of the vehicle could make finding a qualifying EV challenging. The tax credit can be divided in two parts. To be eligible for the first $3,750, a certain proportion of the minerals that are that are used in the battery must be extracted from the U.S. or a country with which there is a U.S. shares a free trade agreement. The second half of the $7,500 focuses on the location where the battery’s components originate from. Most components for batteries must be made within the U.S., Canada or Mexico. The required percentages of critical minerals will be increasing each year from 2024 to 2026 and then until 2028 for all components. In addition, the vehicles have to be built at North America. This poses a problem for some companies that do not longer offer incentives, like Tesla and GM will be able to resume. The law eliminates the limitation on the amount of EVs sold. Previously, manufacturers that sold 200,000 vehicles would no longer be able to offer credits. Tax credits for 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 may not be financially able to purchase a new EV can still benefit from this tax deduction. When costing up to $25,000, drivers can receive a tax credit of up to 30 % 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 in America are now eligible for rebates. U.S. can now receive up to $4,000 on a used EV with a purchase price below the $25,000 threshold,” says Najman. More than that, recent analysis from the reporting agency discovered that “almost 20 percent of used EVs are priced at a level that is eligible and that segment of the market is expected to grow this season,” Najman says. Najman. “An positive early sign,” says Najman, is that “already in January, approximately 50% of used cars that were inspected by us would get some money in return.” This means that while it may seem that tax credits are limited in availability due to the recent legislation, says Najman, “in reality, the introduction of used car tax credits is already expanding its reach and the breadth of drivers who are able to buy and drive an electric vehicle.” When does the new legislation go into force?
Updated used vehicle incentive regulations will apply to cars purchased after Dec. 31st, 2022. They will expire on Dec. 31 2023.
The bottom line If the time to purchase a new set of wheels is near think about buying an electric vehicle in order to tackle climate change and get tax credits for electric vehicles and incentives. Before deciding on a particular EV, do your homework and investigate whether there are tax credits available. It’s also essential to examine the charging stations available in your region and in relation to how you’ll use the vehicle, verify the battery capacity of the EV you’re interested in. It’s time to examine rates and different prices for purchasing EVs over conventional. Information on EV tax credits Are leased cars eligible to receive an EV tax credit? Federal tax credits does not apply to leased vehicles . Instead, the funds goes to the lender. But this still can lower the monthly installment in the event that the lessor 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 applicable regardless of whether you’re leasing or purchasing. What happens to the federal EV tax credit remain available? The credit will likely be around indefinitely, especially when there is a push to make climate-conscious vehicles. However, the vehicles available are constantly shifting due to the phase-out system of tax credits.When an individual manufacturer has reached 200 electric vehicles manufactured to be used throughout the United States, those vehicles cannot be eligible for credits. Because of this rule, it is important to determine whether the car you plan to purchase is available for credit. Are families able to be eligible for more than one EV tax credit? In the event that two household members purchase electric vehicles for themselves and then claim the credit for their own vehicles. If they purchase an EV together the credit can only be claimed one time.
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. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are committed to helping readers feel confident to control their finances by providing precise, well-studied information that breaks down otherwise complex topics into manageable bites.
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