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 financial calculators and tools, publishing original and objective content, by enabling you to conduct research and compare data for free – so that you can make your financial decisions with confidence. Bankrate has agreements with issuers such as, 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 may impact how and where products appear on the site, such as for instance, the sequence in which they appear in the listing categories 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 information we provide, or the reviews you read on this site. We do not include 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 to navigate the details of taking out loans to purchase a car. The article was 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 confidence to manage their finances with clear, well-researched information that breaks down otherwise complicated subjects into digestible pieces. The Bankrate promises
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If you have questions about money. Bankrate can help. Our experts have been helping you manage your money for more than four decades. We continually strive to provide consumers with the expert guidance and the tools necessary to succeed throughout life’s financial journey. Bankrate follows a strict policy, which means you can be confident that our content is honest and reliable. Our award-winning editors and journalists provide honest and trustworthy information to assist you in making the right financial choices. The content we create by our editorial staff is objective, factual, and not influenced by our advertisers. We’re open about the ways we’re capable of bringing high-quality content, 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 placement of sponsored products andservices or by you clicking on certain links posted on our site. So, this compensation can affect the way, location and when products are listed, except where prohibited by law. We also offer mortgage, home equity and other home loan products. Other elements, such as our own rules for our website and whether the product is available in your area or at your own personal credit score can also impact the way and place products are listed on this site. Although we try to offer an array of offers, Bankrate does not include information about every credit or financial products or services. Electric cars aren’t only for those who own cars. In fact, the EV market has seen a dramatic growth in the last few years, with registrations growing to 60 percent by 2022, as per . However, electric vehicle options continue to expand and include a wide selection of designs and prices. also comes with many savings benefits. Apart from the obvious saving on the cost of gas — there are also tax credits for buyers of the electric car. It is contingent on your state of residence having an electric car can help you save thousands. What exactly is the EV tax credit? The EV tax credit is a financial incentive provided by the government to allow you to earn money back in the form an amount of credit, which can be as high as $7,500, when you purchase a qualified electric vehicle. Statistics on Electric Cars The simplest method of determining how the market has expanded is to examine the most recent . About 7 percent of all light-duty sales at the end of 30th of March 2022 comprised 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 16.5 million EVs on the road. ( ) About half of Americans are interested in buying or leasing an EV, up 10 percent from the previous year. ( ) California has the largest number of charging stations with 14,463, followed by New York, Florida and Texas. ( ) Tesla is the most popular electric car among American consumers. ( ) Fifty-three percent of those who aren’t interested in EVs fear the inconvenience that comes with vehicle charging. ( ) Gen Z are the first to adopt electric vehicles, with 32 percent noting they would like to purchase one within the next three years. ( ) Tesla made up 70% of all EV registrations during the first part of 2022. ( ) Fifty-nine percent of customers are either extremely or somewhat likely to buy an EV ( ).
EV tax credit requirements The EV tax credit was a Federal incentive designed to motivate drivers to buy the electric car. The incentive isn’t an actual check that you receive in the mail following the purchase of a car, but rather a tax credit worth up to $7,500 you are eligible for. This tax credit is applicable to all plug-in or electric automobiles, but exact credit amounts are available through the U.S. Department of Energy’s website . How to qualify Depending 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 prior to the date of purchase, it must be purchased on or within the last 12 months of December 31 of 2009. Must be a new vehicle that is not being used. Must be a purchased vehicle, not leasing. The weight rating must be upwards of 14,000lbs. The battery must have a capacity of at minimum four Kilowatt per hour (kWh). The battery is designed for use within the United States. To be used for your personal usage, not to be sold. Utilize an external recharge source. If your vehicle was bought in 2023 or the following year: Purchase it solely for personal usage, not for resales. Use it primarily within the U.S. The battery must have a capacity of at minimum seven kWh. A vehicle’s gross weight rating of less than 14000lbs. It must be made by a . Final assembly will be completed in North America. MSRPs below $80,000 for vans or sport utility vehicles, pickup trucks and $55,000 for other types of vehicles. If the vehicle you are using was bought in 2023 or later: Be an individual who purchased the vehicle solely for use and not for resale. Be the owner of the vehicle at first. Not be claimed as dependent on another’s tax return. Have not claimed a used clean vehicle credit within the 3 years before the date of purchase. Have a sale price of $25,000 or less. Have a model year at least two years earlier than the calendar year when you purchase it. For example, a vehicle bought in 2023 will require a model year of 2021 or older. Have not been transferred between the 16th of August, 2022 to a qualified buyer. Have a gross vehicle weight of not more than 14,000lbs. Be an eligible FCV or plug-in electric vehicle with the capacity of a battery of at least 7 kWh. The battery must be used primarily in the United States. Be bought by an agent. Bankrate tip
To find where your vehicle was made, simply enter the VIN (vehicle identification number) on the website. It is also crucial to keep in mind that buying the vehicle alone does not ensure that you get the tax credit. You must file an application with IRS.
The tax credit for income and the EV credit Anyone who provides the necessary information for a qualifying vehicle using Form 8936 might be qualified for an electric vehicle tax credit. The amount of money your earn will affect the tax credits you are eligible for. If you make an amount, more than $300,000 for married couples filing jointly or the heads of household and $150,000 for all other taxpayers, you do not qualify for tax credits. Local and state EV incentives and tax credits There are many states that do not offers EV tax incentives and tax credits. In fact, over half the states don’t offer any EV tax credit program. Therefore, prior to setting out to purchase the charging station you need for your garage, determine the amount you could save in your state. EV tax credits for vehicles brand Here are a few particular EV tax credits offered by various vehicle brands. Like every state has its own unique tax system and offers different benefits, think about the benefits of one vehicle brand to other. Vehicle brand
Credit available
Information collected from
Audi
From $4,502 to $7,500
BMW
From $3,793 to $7500
Chevrolet
No longer eligible
Fiat/Chrysler
$7,500
Ford
Between $4,007 and $7,500
Honda
$3,626 to $7,500
Hyundai
$4,543 to $7,500
Jaguar/Land Rover
$6,295 to $7,500
Kia
From $4,543 to $7,500
Mercedes
From $3,501 to $7,500
Mitsubishi
Between $5,836 and $7,500
Nissan
$7,500
Porsche
From $3,667 to $7500
Subaru
From $4,502 to $7,500
Tesla
No longer eligible
Toyota
$2,500 to $7,500
Volkswagen
$7,500
Volvo
$4,585 to $7,500
The decision to purchase an EV Just as with buying a traditional gas car making the decision to enter the world of electric vehicle buying will require you to consider a number of aspects, including cost, size and practicality. But purchasing an EV requires extra thought. Here are some questions you should think about before you decide whether to buy you want to purchase an electric vehicle is right for you. Are charging facilities available in my local area? Before you decide to purchase an EV it is essential to ensure that there are available charging stations in your region. Use resources like those offered through to look into options before purchasing. What is the vehicle range? You’ll need to verify that the new range is compatible with your normal driving habits as well as any other trips you might be contemplating. What is the expected maintenance of your vehicle? While you will need to reserve some cash for service checks but you don’t need to worry about expenses from oil replacement or other equipment for emissions. What’s the price of EV insurance? The cost of EV insurance varies, so it is best to research and determine the lender will best suit your requirements. Take a look at Bankrate’s guide . Should I lease an EV? Think about if you’re able to find advantageous incentives from the manufacturer or you would rather change your car every couple of years. Do I need to buy a new car or used? Consider incentives available and your budget. The future of EV tax credits Electric vehicles remain among the most expensive vehicles on the market, and until more are produced, they will predictably stay at a higher cost. But because manufacturers are making green vehicles prioritizing green vehicles as well as the federal government trying to encourage that with tax credits, it is likely that the tax credit will not be vanishing in the near future. If you’ve been thinking about going green for a while, now might be a good time to act. This is especially true following President Biden’s August 2021 executive order which stated that 50% of all new vehicles sold within the U.S. should be electric in 2030. Although that’s an impressive percentage increase from where you are today, you could be able to make the most of the present surge in electric cars and save money with an available tax credit. 2022 Inflation Reduction Act Following months of debate and debate, the 755-page Inflation Reduction Act passed and was approved by Vice President Biden on Aug. 16. It is designed to “fight inflation and to invest in manufacturing and energy production and cut carbon emissions by around 40 percent in the next decade,” according to a . The new law will impact tens of million of Americans and could encourage more drivers to switch to electric vehicles and lower carbon emissions. The part of the legislation on clean vehicles indicates 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 qualifying EV challenging. The incentive can essentially be divided in two parts. In order for a car to be eligible for the first $3,750 and a specific amount of essential minerals utilized in its battery have to 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 from either the U.S., Canada or Mexico. The percentages required of crucial minerals will be increasing each year , from 2024 to 2026, and until 2028 for components. In addition, the vehicles have to be manufactured in North America. While this creates a challenge, many manufacturers that no provide incentives, such as Tesla and GM will be able to return. The legislation removes the limit on the amount of EVs sold. Manufacturers who sold 200,000 vehicles would no longer be eligible for credit. Credits for used EV tax credits Another significant change that has occurred since the legislation was passed is in regards to used EV tax credit. Drivers who aren’t in a position to buy a brand new EV can still benefit from the tax credit. For purchases between $25,000 and $25,000, motorists are eligible for a tax credit of up to 30 % of the cost of purchase, with a limit of $4,000. Liz Najman, leader of the ‘Policy Research’ department at, discussed how the new legislation will impact car buyers. “Many automobile buyers in America are now eligible for rebates. U.S. can now receive up to $4,000 on used electric vehicles that has a price less than $25,000,” says Najman. In addition, a recent research from the agency’s report revealed that “almost 20% of used EVs are priced at a level which is eligible and that segment that is eligible for tax credits only expected to grow in the coming year,” says Najman. “An encouraging early indicator,” says Najman, is that “already in January, about 50% of used cars checked with our would receive the money in return.” So while it might appear that tax credits have limited availability due to the 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 purchase and drive an EV.” When will the new law take force?
New used vehicle incentive rules will be applicable to vehicles purchased after Dec. 31, 2022 and expire the following year on Dec. 31 2023.
The final word If you are considering buying a new set of wheels is now upon you, consider buying a electric vehicle to combat climate change and get tax credits for electric vehicles and incentives. Before deciding on a particular EV be sure to do your homework and investigate whether there are tax credits still available. It’s also essential to investigate the charging stations available in your region and in relation to how you’ll use the vehicle, check the battery capacity of the model you’re interested in. When it comes time to find and evaluate rates and costs for buying EV over traditional. FAQs about EV tax credits Are leased cars eligible for an EV tax credit? Tax credit for federal residents does not apply to these . Instead, that money is paid to the leaser. However, this can still reduce the monthly payments in the event that the leaser decides to include the incentive into the lease agreement. You can mention this in order to try saving money.Certain states offer incentives that are applicable regardless of whether you are leasing or purchasing. What happens to you see the Federal EV tax credit be around? The credit will likely be around indefinitely, especially with increased pushes for more climate-conscious vehicles. However, the vehicles available are always changing 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 within the United States, those vehicles are no longer eligible for credits. This is why it’s crucial to verify if the vehicle you intend to purchase is still available to be financed. Are families able to get multiple EV tax credit? In the event that two household members buy electric vehicles for their own each, they are able to apply for the tax credit on their individual cars. If the two buy an EV jointly, the credit may only be claimed one time.
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The article was written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in assisting readers to navigate the ways and pitfalls of borrowing money to purchase a car. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are passionate about helping readers feel confident to take control of their finances with clear, well-researched facts that break down otherwise complicated subjects into bite-sized pieces.
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