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 tools and financial calculators as well as publishing informative and original content, by enabling you to conduct your own research and compare information without cost, so that you can make decisions about your finances with confidence. 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 offers that appear on this site are from companies who pay us. This compensation can affect the way and when products are featured on this website, for example such things as the sequence in which they be listed within the categories of listing in the event that they are not permitted by law. This applies to our mortgage, home equity, and other home lending products. But this compensation does have no impact on the content we publish or the reviews you read on this site. We do not include the universe of companies or financial offers that may be available to you. mseidelch/Getty Images
9 min read Published on January 23, 2023.
Written 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 details of borrowing money to purchase cars. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping readers gain the confidence to take control of their finances with precise, well-studied information that breaks down otherwise complex topics into manageable bites. The Bankrate promise
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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 decades. We strive to continuously provide consumers with the expert guidance and the tools necessary to be successful throughout their financial journey. Bankrate adheres to strict standards , so you can trust that our content is honest and reliable. Our award-winning editors, reporters and editors provide honest and trustworthy information to assist you in making the right financial choices. Our content produced by our editorial staff is objective, truthful, and not influenced from our advertising. We’re transparent about how we are capable of bringing high-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 for the placement of sponsored products andservices or when you click on certain links posted on our website. Therefore, this compensation may influence the manner, place and in what order products are listed in the event that they are not permitted by law. This is the case for our mortgage, home equity and other home loan products. Other factors, like our own proprietary website rules and whether the product is available in the area you reside in or is within your personal credit score can also impact the manner in which products are featured on this website. Although we try to offer the most diverse selection of products, Bankrate does not include information about every financial or credit 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 experienced a massive growth over the past few years, and registrations have increased to 60 percent by 2022, according to . However, electric vehicle options continue to expand and include a wide selection of designs, styles and prices. also comes with many benefits for saving money. Apart from the obvious saving on the cost of gas , there are electric car tax credits for those who purchase vehicles powered by electricity. Based on the state you reside in having an electric car could save you thousands. What is what is the EV tax credits? It is the EV tax credit can be described as a tax incentive provided by the government that will allow you to earn money back in the form a credit, up to $7,500, when you purchase an eligible electric vehicle. Electric cars statistics The easiest method of determining how the market is growing is to look at the most recent . About 7 percent of all light-duty sales at the end of the third quarter of 2022 was electric vehicles. ( ) California has the largest percentage of new EV registrations at the time of December 31, 2021, at around 39 percent. ( ) In the year of 2021, there would be 16.5 million electric vehicles in circulation. ( ) Nearly fifty percent of Americans are considering buying or leasing an EV which is up by 10 percent over last year. ( ) California has the highest number of charging stations, with 14,463. then New York, Florida and Texas. ( ) Tesla is the most popular electric vehicle among American customers. ( ) 53 percent of those who aren’t interested in EVs are concerned about the hassle of charging their vehicles. ( ) Gen Z are the first users of electric vehicles, with 32 percent noting they would like to purchase one in the coming three years. ( ) Tesla made up 70% of all EV registrations in the first half of 2022. ( ) fifty-nine percent of consumers are somewhat or extremely likely to buy an EV ( ).
EV tax credit eligibility requirements EV tax credit was a Federal incentive created to motivate drivers to buy vehicles powered by electricity. This isn’t an actual check that you receive in the mail following an automobile purchase and is instead an amount of tax credit that can range from to $7,500 that you become eligible to receive. The credit is available to all plug-in or electric vehicles, however specific credit amounts are available on 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 specifications. If you purchased your car in 2022 or earlier the date of purchase, it must be purchased on or within the last 12 months of December 31 of 2009. It must be a brand new vehicle that is not being used. It must be a new vehicle that is not leased. Have a weight rating of up to 14,000 pounds. Have a battery capacity of at least 4 Kilowatt hours (kWh). The battery is designed for use in the United States. For your own usage, not to be sold. Make use of an external recharge source. If your vehicle was purchased in 2023 or after: Buy it for your own useand not to resell. Use it primarily within the U.S. You must have a battery capacity of at minimum seven kWh. A vehicle’s gross weight of less than 14000lbs. The vehicle must be manufactured 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 your used vehicle was purchased in 2023 or later: Be an individual who purchased the vehicle to use it and not for resales. Not be the original owner. The vehicle cannot be claimed as a dependent on another person’s tax return. Not have claimed another used clean vehicle credit within the three years prior to the purchase date. Have a sale price of $25,000 or less. Model year must be at least 2 years earlier than the calendar year at the time you purchase it. For instance, a vehicle purchased in 2023 would need a model year 2021 or later. Not have already been transferred after August 16, 2022, to a buyer who is qualified. Be a vehicle with a gross weight of less than 14,000 pounds. Be an eligible FCV or plug-in electric vehicle with the capacity of a battery of at least 7 kWh. Be for use primarily inside the United States. Be bought by an authorized dealer. Tip for Bankrate
To find where your vehicle was made, simply enter the VIN (vehicle identification number) on the website of’s. It is also important to note that purchasing the vehicle on its own will not ensure that you get your tax credits. It is necessary to file a tax return with the IRS.
The tax credit for income and the EV credit Any driver who submits the necessary information for a qualifying vehicle using Form 8936 may be eligible to receive an electric vehicle tax credit. But amount of income your earn will affect the tax credits you are eligible for. If you earn an amount that is greater than 300,000 for couples who file jointly, 225,000 for head of household and $150,000 for the rest of the taxpayers, you won’t 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 of states do not offer any EV tax credit program. So, before you set out to buy the charging station you need for your garage, consider how much you can save in your state. EV tax credits by vehicle manufacturer Here are some of the special EV tax credits provided by the various brands of vehicles. Just as each state differs and offers different benefits, think about the benefits of one vehicle brand compared to other. Brand name of the vehicle
Credit is available
Information gathered from
Between $4,502 and $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
From $4,543 to $7,500
$3,501 to $7,500
$5,836 to $7,500
From $3,667 to $7500
$4,502 to $7,500
No longer eligible
Between $2,500 and $7,500
From $4,585 to $7,500
The decision to purchase an electric vehicle is similar to purchasing a gas-powered vehicle, deciding to dive into the world of buying an electric vehicle requires questioning several factors, like the cost, size and utility. However, buying an EV takes extra consideration. Here are a few questions to ask yourself before deciding whether an electric vehicle. Is there charging available in my area? Before you decide to purchase an EV it is essential to verify that there are charging stations within your vicinity. Utilize resources such as those available through to explore options before buying. What is the vehicle range? You’ll need to verify that the new range is compatible with your normal driving habits and any excursions you might be contemplating. What’s the anticipated maintenance of your vehicle? While you’ll have to set aside some cash to cover service checks however, you will not have to fret about the cost of oil changes or other emissions equipment. What is the cost of EV insurance? The cost of EV insurance is variable, so you need to research and determine which lender is the best fit for your requirements. Take a look at Bankrate’s guide . Should I lease an EV? Consider if you are able to find beneficial manufacturer incentives or if you’d rather replace 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 tax credits Electric vehicles are still some of the most expensive cars on the market, 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 as well as the federal government trying to reward them with tax credits, it is likely that the tax credit won’t be disappearing in the near future. If you’ve been thinking about making the switch to green for some time, now might be an ideal time to start. This is especially true following President Biden’s executive order which stated that 50% of all new vehicles that are sold in the U.S. should be electric by 2030. Although that’s an impressive percentage increase from where you are today, you could benefit of the current influx of electric vehicles and also save some money by taking advantage of an available tax credit. 2022 Inflation Reduction Act Following months of deliberation, the 755-page Inflation Reduction Act passed and was signed into law by President Biden on August. 16. The legislation aims to “fight inflation and to invest in manufacturing and energy production, and reduce carbon emissions by roughly 40 percent in the next decade,” according to a . The new law is likely to impact tens of million of Americans and encourage more drivers to go electric, and help reduce carbon emissions. The legislation concerning clean vehicles states that the same tax credit will be offered to buyers who buy an EV however more strict requirements on the vehicle components may make finding a suitable EV difficult. The incentive is divided into two components. For a vehicle to qualify for the initial $3,750 amount the percentage of critical minerals used in its battery must be extracted in the U.S. or a country with which there is a U.S. shares a free trade agreement. The second portion of $7,500 focuses on the country where the components of the battery come from. The majority of battery components have to be produced from either the U.S., Canada or Mexico. The percentages required of crucial minerals will be increasing each year from 2024 to 2026, and will continue until 2028 for components. Furthermore, the cars must be assembled in North America. Although this poses a challenge, many manufacturers that no are offering incentives, like Tesla and GM, will be able to return. The legislation removes the limit on the amount of EVs sold. Manufacturers who sold 200 vehicles could no longer be eligible to offer credit. Tax credits for used EV tax credits Another major shift that this law has brought about concerns used EV tax credit. Drivers who may not be financially able to purchase a new EV may still be eligible for the tax credit. For purchases up to $25,000, buyers are eligible for a tax credit that is up to 30 percent of the purchase price with a $4,000 cap. Liz Najman, leader of policy research at , explained how the new legislation will impact car buyers. “Many people who buy cars within the U.S. can now receive up to $4,000 in rebates on a used EV with a purchase price below the $25,000 threshold,” explains Najman. Additionally, a recent research from the agency that conducts the analysis discovered that “almost 20% of used EVs are priced at a level that is eligible and that portion in the marketplace is only expected to grow this season,” Najman says. Najman. “An positive early sign,” says Najman, is that “already in January, about 50% of used cars that were inspected by us would get some money back.” This means that while it may seem like tax credits have a limited availability following the recent legislation, according to Najman, “in reality, the inclusion of used cars in tax credits is already expanding their coverage and the number of those who are able to buy and drive an electric vehicle.” When will the new legislation take force?
New used vehicle incentive rules will apply to cars purchased after Dec. 31, 2022. They will end the year following at the end of December. 31 2023.
The main point is that if the time to purchase new wheels is upon you look into purchasing an electric vehicle in order to tackle climate change . Additionally, you can benefit from EV tax credits and incentives. Before deciding on a particular EV be sure to do your homework and find out if tax credits that are still available. It’s also important to look into the charging stations available in your region and in relation to how you plan to use the vehicle, check the battery range of the EV you’re interested in. It’s time to find and compare rates and differing costs of buying an EV over conventional. FAQs about EV tax credits Are leased cars eligible for an EV tax credit? Tax credit for federal residents does not apply to those . Instead, the money will go to the lessor. But this still can lower the monthly installment in the event that the lessor chooses to factor that incentive into your lease agreement. 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. Do you think the federal EV tax credit remain in use? It is likely that the credit will remain in place for a long time, particularly with increased pushes for more climate-aware vehicles. However, the number of vehicles that are available is always changing due to the phase-out structure of tax credits.When an individual manufacturer has reached 200 electric vehicles manufactured to be used in the United States, those vehicles are no longer in the range of credits. This is why it is important to determine whether the car you want to purchase is still available to be financed. Does a family be eligible for several EV credit tax deductions? If two members of the same household buy electric automobiles for themselves, they can separately claim credit for the cars they own. If the two buy an EV jointly it can only be claimed once.
Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the ins and outs of securely borrowing money to purchase 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 the confidence to manage their finances through providing precise, well-studied details that cut complex topics into manageable bites.
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