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 financial calculators and tools as well as publishing informative and original content. This allows users to conduct research and compare data for free – so that you can make decisions about your finances with confidence. Bankrate has partnerships with issuers such as, 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 website are provided by companies who pay us. This compensation could affect how and when products are featured on this website, for example such things as the order in which they may be listed within the categories of listing in the event that they are not permitted by law. Our mortgage, home equity and other home loan products. But this compensation does have no impact on the information we publish, or the reviews that you see on this site. We do not include the vast array of companies or financial offers that may 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 specializes in helping readers to navigate the details of borrowing money to purchase a car. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain confidence to manage their finances with concise, well-researched and well-documented information that breaks down complex topics into manageable bites. The Bankrate promises
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If you have questions about money. Bankrate has answers. Our experts have been helping you master your finances for more than four years. We strive to continuously give our customers the right guidance and the tools necessary to succeed throughout life’s financial journey. Bankrate adheres to a strict code of conduct standard of conduct, so you can rest assured that our content is truthful and precise. Our award-winning editors and reporters create honest and accurate content that will help you make the right financial decisions. Our content produced by our editorial staff is objective, truthful, and not influenced through our sponsors. We’re open regarding how we’re able to bring quality content, competitive rates and useful tools to our customers by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the promotion of sponsored goods or services, or through you clicking certain links posted on our website. Therefore, this compensation may affect the way, location and when products appear in listing categories, except where prohibited by law. We also offer mortgage, home equity and other home loan products. Other elements, such as our own website rules and whether a product is available within the area you reside in or is within your own personal credit score may also influence the way and place products are listed on this site. While we strive to provide a wide range offers, Bankrate does not include information about each credit or financial item or product. Electric vehicles are no longer exclusive to car owners. It is now a reality for all types of people. EV market has seen a dramatic growth in the last few years, with registrations growing to 60 percent by 2022, according to . At the same time the options for electric vehicles continue to diversify and now offer a variety of designs and pricing. also comes with many money-saving perks. In addition to the obvious cutting down on gas , there are also tax credits for those who purchase an electric vehicle. It is contingent on your state of residence, owning an electric vehicle can help you save thousands. What exactly is what is the EV tax credits? What is it? EV tax credit can be described as a tax incentive built by the government that will allow you to earn cash from the back of an amount of credit, which can be as high as $7,500, if you buy an eligible electric vehicle. Electric cars statistics The simplest way to see how much the market has grown is to take a look at the most recent . About 7 percent of all light-duty sales in the third quarter of 2022 were electric vehicles. ( ) California has the highest percentage of new EV registrations on December 31, 2021 with approximately 39 percent. ( ) In the year of 2021, there would be 16.5 million electric vehicles driving around. ( ) Around fifty percent of Americans are interested in buying or leasing an electric vehicle increasing by 10 percent from last year. ( ) California has the largest number of charging stations, with 14,463. then New York, Florida and Texas. ( ) Tesla is the most popular electric car among American consumers. ( ) Fifty-three percent of drivers uninterested 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 68 percent of all EV registrations in the first second quarter of 2022. ( ) Five-thirty-nine percent people are likely to buy an EV ( ).
EV tax credit requirements EV tax credits are a government incentive created to encourage drivers to purchase an electric vehicle. This incentive is not the kind of check you get after the purchase of a car, but rather the tax credit of up to $7500 that you will be eligible to receive. The credit is available to all plug-in and electric automobiles, but exact credits are available through the U.S. Department of Energy’s website . What criteria to be considered for qualifying based on the condition of your vehicle in order to be eligible for the incentives, your vehicle must meet certain requirements. If the vehicle was purchased in 2022 or before the date of purchase, it must be purchased on or within the last 12 months of December 31 in 2009. The vehicle must be brand new and not previously used. Must be a purchased vehicle that is not leasing. Have a weight rating of up to 14,000 pounds. The battery must have a capacity of at least 4 kilowatt hour (kWh). The battery is designed for use within the United States. To be used for your personal use, not for resale. Make use of an external recharge source. If your new vehicle was purchased in 2023 of the following year: Purchase the battery for your personal use, not for resale. It is used primarily for use in the U.S. Have a battery capacity of at minimum seven kWh. A vehicle’s gross weight rating of less than 14000 pounds. It must be made by a . Finish assembly process at North America. MSRP less than $80,000 for vans or sport utility vehicles, pickup trucks, and $55,000 for other vehicles. If the vehicle you are using was purchased in 2023 or later: Be an individual who bought the vehicle solely for use and not to resell. Be the owner of the vehicle at first. Not be claimed as a dependent on another person’s tax return. Not have claimed another used clean vehicle credit in the 3 years before the date of purchase. The price must be less than $25,000. Have a model year that is at least two years older that the year in which you buy it. For instance, a vehicle that you purchase in 2023 must have a model year of 2021 or older. Not have already been transferred prior to August 16, 2022 to a buyer who is qualified. The vehicle must have a weight of under 14,000 pounds. You must be a FCV-compliant plug-in electric vehicle with an energy capacity of at least seven kWh. Be for use primarily in the United States. Be bought through an authorized dealer. Bankrate tip
To find where your vehicle was made, simply enter the VIN (vehicle identification number) on ‘s website. It is also crucial to keep in mind that buying the car on its own does not guarantee you’ll get the tax credit. You must file an application with IRS.
The tax credit for income and the EV credit Any motorist who submits the required details for a qualified vehicle by using Form 8936 may be eligible for an EV tax credit. But amount of income you earn can impact the tax credits you receive. If you earn a certain amount of money in excess of 300,000 for couples who file together and $225,000 for heads of household and $150,000 for the rest of the filers, you will not be eligible to receive tax credit. Local and state EV incentives and tax credits Unfortunately, not every state provides EV tax incentives and tax credits. In fact, more than half of the states in the United States do not offer any EV tax incentive program. Before you head out to purchase a charging station for your garage, determine how much you can save in your 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 other. Brand name of the vehicle
Credit available
Information gathered from
Audi
Between $4,502 and $7,500
BMW
$3,793 to $7,500
Chevrolet
No longer eligible
Fiat/Chrysler
$7,500
Ford
$4,007 to $7,500
Honda
Between $3,626 and $7,500
Hyundai
Between $4,543 and $7,500
Jaguar/Land Rover
$6,295 to $7,500
Kia
$4,543 to $7,500
Mercedes
$3,501 to $7,500
Mitsubishi
$5,836 to $7500
Nissan
$7,500
Porsche
From $3,667 to $7500
Subaru
Between $4,502 and $7,500
Tesla
No longer eligible
Toyota
$2,500 to $7,500
Volkswagen
$7,500
Volvo
$4,585 to $7,500
Making the choice to purchase an electric vehicle is similar to buying a traditional gas car, deciding to dive into the world of buying an electric vehicle involves weighing a variety of factors such as the cost, size and utility. But buying an EV needs extra consideration. Here are some questions you should consider before you decide to purchase you want to purchase an electric vehicle is right for you. Is there charging available in my local area? Before you purchase an EV, it is important to confirm that there are available charging stations in your region. Use resources like those offered through to research options prior to buying. What’s the range of your vehicle? You will need to confirm that the range of your new car fits your typical driving routine — and any trips you might be contemplating. What is the expected maintenance of your vehicle? While you will need to reserve some cash for service checks, you won’t have to fret about the cost of oil replacement or other equipment for emissions. How much is EV insurance? The price of EV insurance ranges so best to do some research and figure out the lender is the best fit for your requirements. Find Bankrate’s advice on . Do I need to lease an electric vehicle? Think about if you’re in a position to get beneficial manufacturer incentives or if you would rather change your vehicle every couple of years. Do I need to buy a new car or used? Take a look at incentives available and consider your budget. The future of tax credits Electric vehicles are still one of the most expensive cars on the market, and until they are made available in the near future, they’ll remain at a more expensive price. However, as manufacturers are making green cars prioritizing green vehicles and the government is looking to encourage that by offering tax credits, this tax credit won’t be disappearing anytime soon. If you’ve been interested in going green for a while it’s a good time to act. This is particularly true in light of President Biden’s August 2021 executive order which stated that 50% of all new vehicles that are sold within the U.S. should be electric by 2030. While that is quite an increase of a significant percentage from the present, you might be able to take advantage of the current surge of electric car options and save money with the tax credit available. 2022 Inflation Reduction Act Following months of debate and debate, 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 invest in domestic energy production and manufacturing and reduce carbon emissions by roughly 40 percent by 2030, » according to a . The new law will be affecting tens of millions of Americans and encourage more drivers to go electric, and help reduce carbon emissions. The part of the legislation on clean vehicles indicates that the same tax credit will be available to those who buy an EV however, more strict requirements on the vehicle components may make finding a suitable EV challenging. The tax credit can be divided into two components. For a vehicle to qualify for the initial $3,750 incentive, a certain amount of essential minerals that are used in the battery must be mined in the U.S. or a country that there is a U.S. shares a free trade agreement. The second part of $7,500 is about where the battery components come from. Most components for batteries must be manufactured from Canada, the U.S., Canada or Mexico. The required percentages of critical minerals will rise each year from 2024 to 2026, and until 2028 for all components. In addition, the vehicles have to be built in North America. While this creates a challenge for some companies that do not are offering incentives, like Tesla and GM are expected to resume. The legislation removes the limit on the number of EVs sold. Manufacturers who sold 200 vehicles could no longer be eligible for credit. Credits for used EV tax credits Another major shift following this legislation pertains to used EV credits for tax purposes. Drivers who may not be able to afford a brand-new EV can still benefit from the tax credit. When costing up to $25,000, buyers can receive a tax credit of up to 30 % of the purchase price with a $4,000 cap. Liz Najman, leader of policy research at , outlined how the new law will impact car buyers. « Many car buyers across 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, » states Najman. Additionally, a an analysis by the agency that conducts the analysis discovered that « almost 20% of used EVs have a price which is eligible and that segment in the marketplace is only predicted to increase this year, » says Najman. « An positive early sign, » says Najman, is that « already in January, about 50% of cars checked with our would receive the money back. » This means that while it may seem that tax credits have limited availability following the recent legislation, says Najman, « in reality, the inclusion of used car tax credits is already expanding their reach and the breadth of those who are able to purchase and drive an EV. » When will the new legislation go into effect?
New used vehicle incentive rules are applicable to vehicles bought after December. 31st, 2022. They will end the year following at the end of December. 31 2023.
The main point is that if you are considering buying a new set of 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 make sure you do your research and determine if there are tax credits still available. It’s also essential to examine the charging stations available in your local area. Also, depending on how you’ll use the vehicle, check that the battery’s range is the same for the vehicle you’re considering. When it comes time to find and evaluate rates and prices for purchasing EVs instead of traditional. Questions about tax credits for electric vehicles Do leased vehicles qualify to receive an EV tax credit? Federal tax credits will not apply to those . Instead, the funds goes to the lender. However, this can still lower a monthly payment in the event that the lessor decides to incorporate the incentive into your lease contract. Mention this during to try and save money.Certain states offer incentives that are available regardless of whether you are leasing or purchasing. Will this federal EV tax credit be around? The credit is likely to be around indefinitely, especially when there is a push to make environmentally conscious vehicles. However, the number of vehicles that are available is constantly shifting due to the phase-out structure 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 not qualified for tax credits. This is why it is important to determine whether the car you want to purchase is available to be financed. Can a household be eligible for more than one EV credit tax deductions? In the event that two household members buy electric vehicles for themselves each, they are able to claim credit for their individual cars. 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 is a specialist in helping readers to navigate the ins and outs of securely taking out loans to purchase cars. 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 committed to helping readers feel confident to take control of their finances through providing precise, well-studied information that breaks down otherwise complex topics into manageable bites.
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