EV tax credit: What to know before you buy Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our aim is to assist you make better financial decisions by providing you with interactive financial calculators and tools that provide objective and unique content, by enabling you to conduct research and compare information for free – so that you can make financial decisions without trepidation. Bankrate has agreements with issuers such as, but not limited to American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn money The products that appear on this site come from companies that pay us. This compensation may impact how and where products appear on the site, such as such things as the sequence in which they appear within the listing categories and other categories, unless prohibited by law. This applies to our loan products, such as mortgages and home equity, and other home lending products. However, this compensation will affect the information we publish, or the reviews that you read on this site. We do not contain the entire universe of businesses or financial offerings that might be available 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 is a specialist in helping readers to navigate the details of taking out loans to purchase cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are passionate about helping readers gain the confidence to take control of their finances by providing clear, well-researched information that breaks down otherwise complicated topics into bite-sized pieces. The Bankrate guarantee
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You have money questions. Bankrate has answers. Our experts have been helping you manage your money for more than four years. We continually strive to give our customers the right advice and tools needed to make it through life’s financial journey. Bankrate adheres to strict standards policy, which means you can be confident that our content is truthful and precise. Our award-winning editors, reporters and editors produce honest and reliable information to assist you in making the best financial decisions. The content created by our editorial staff is factual, objective and is not influenced by our advertisers. We’re transparent about how we are in a position to provide 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 in exchange for the placement of sponsored products andservices or by you clicking 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. We also offer mortgage, home equity and other products for home loans. Other factors, such as our own rules for our website and whether the product is available in the area you reside in or is within your own personal credit score could also affect how and where products appear on this site. While we strive to provide the most diverse selection of products, Bankrate does not include the details of every credit or financial product or service. Electric cars aren’t just for car buyers. It is now a reality for all types of people. EV market has seen a dramatic growth over the past few years, with registrations growing to 60 percent by 2022, as per . However the options for electric vehicles are expanding and currently include a wide selection of designs and pricing. Additionally, electric vehicles come with numerous savings benefits. In addition to the obvious cutting down on gasoline, there are also tax credits available to people who buy vehicles powered by electricity. Depending on your home state having an electric car can save you thousands. What exactly is what is the EV tax incentive? The EV tax credit is a tax incentive created by the government to allow you to earn cash back in the form of credits, up to $7,500, when you purchase an eligible electric vehicle. Statistics on Electric Cars The easiest method to determine how the market has expanded is to take a look at the most recent . Seven percent or less of all light-duty sales as of the third quarter of 2022 was electric vehicles. ( ) California has the most new EV registrations at the time of December 31, 2021 with approximately 39 percent. ( ) By the end of 2021, there were 16.5 million EVs driving around. ( ) About fifty percent of Americans are interested in purchasing or leasing an electric vehicle, up 10 percent from last year. ( ) California has the largest number of charging stations at 14,463, followed by New York, Florida and Texas. ( ) Tesla is the most popular electric vehicle among American customers. ( ) fifty-three percent of those who aren’t interested in EVs worry of the inconvenience of charging their vehicles. ( ) Gen Z are the first to adopt electric vehicles with 32 percent indicating their desire to buy one in the next three years. ( ) Tesla made up the majority of EV registrations during the first half of 2022. ( ) fifty-nine percent of customers are either extremely or somewhat likely to buy an EV ( ).
EV tax credit eligibility requirements EV tax credit was a Federal incentive designed to motivate drivers to buy an electric vehicle. This incentive is not a check you receive in the mail following a vehicle purchase instead, it’s the tax credit of up to $7,500 you are eligible to receive. This tax credit is applicable to all plug-in and electric vehicles, however specific credit amounts can be found through the U.S. Department of Energy’s website . What is the criteria for qualifying? Depending on the condition of your vehicle, to qualify for available incentives, your vehicle has to meet certain criteria. If your vehicle was purchased in 2022 or prior to: Have been purchased within the last 12 months of December 31 in 2009. The vehicle must be brand new and not previously used. It must be a new vehicle that is not leasing. It must weigh between 14,000 and 14000 pounds. The battery must have a capacity of at minimum four kilowatt per hour (kWh). The battery is designed for use for use in the United States. To be used for your personal use, not for resale. Use an external plug-in recharge source. If your new vehicle was bought in 2023 or the following year: Purchase it solely for personal usage, not for resales. It is used primarily within the U.S. Have a battery capacity of at least 7 kWh. You must have a vehicle weight of less than 14000lbs. The vehicle must be manufactured by an . 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 bought in 2023 or earlier the date of purchase: You must be an individual who purchased the vehicle to use it and not for resales. Not be the original owner. Not be claimed as an dependent on someone else’s tax return. Not claimed another clean vehicle credit in the 3 years before the date of purchase. You must have a purchase price of less than $25,000. Have a model year at least 2 years earlier than the calendar year in which you purchase it. For instance, a car that you purchase in 2023 must have to have a model that was 2021 or more. Have not been transferred prior to the 16th of August, 2022, to a qualified buyer. The vehicle must have a weight rating of not more than 14,000lbs. Have a valid FCV or plug-in electric vehicle with an energy capacity of at least seven kWh. Be for use primarily within the United States. Be bought from an agent. Bankrate tip
To find where your vehicle was built, type in the VIN (vehicle identification number) on ‘s website. It is important to note that purchasing the vehicle alone does not guarantee you’ll get the tax credit. You have to file with the IRS.
Taxes on income and the EV tax credit Any motorist who submits the necessary information to qualify a vehicle on Form 8936 might be qualified to receive an electric vehicle tax credit. The amount of money you earn can impact the tax credits you get. If you earn an amount, more than $30,000 for married couple filing jointly and 225,000 for head of household and $150,000 for the rest of the filers, you will not qualify in tax-credits. State and local EV tax incentives and tax credits There are many states that do not offers EV incentives and tax credits. In fact, over half of the states in the United States don’t have any EV tax incentive program. So, before you set out to buy the charging station you need in your garage, think about how much you can save in your state. EV tax credits based on vehicle manufacturer Here are some of the particular EV tax credits provided 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 compared to another. Brand name of the vehicle
Credit available
Information obtained from
Audi
From $4,502 to $7,500
BMW
$3,793 to $7,500
Chevrolet
No longer eligible
Fiat/Chrysler
$7,500
Ford
Between $4,007 and $7,500
Honda
$3,626 to $7,500
Hyundai
From $4,543 to $7,500
Jaguar/Land Rover
Between $6,295 and $7,500
Kia
Between $4,543 and $7,500
Mercedes
Between $3,501 and $7,500
Mitsubishi
$5,836 to $7,500
Nissan
$7,500
Porsche
$3,667 to $7,500
Subaru
$4,502 to $7,500
Tesla
No longer eligible
Toyota
From $2,500 to $7,500
Volkswagen
$7,500
Volvo
Between $4,585 and $7,500
Making the choice to purchase an electric vehicle is similar to purchasing a gas-powered vehicle making the decision to enter the world of buying an electric vehicle will require you to consider a number of aspects, including the cost, size and utility. But purchasing an EV needs extra consideration. Here are some questions to think about before you decide whether to buy you should buy an electric vehicle is the right choice for you. Are there charging stations in my area? Before you decide to purchase an EV it is crucial to ensure that there are available charging stations in your region. Make use of resources like those provided through to explore options before buying. What is the vehicle range? You’ll need to verify that the range of your new car fits your typical driving routine — and any trips you’re thinking of. What’s the anticipated maintenance of your vehicle? While you will need to reserve some cash to cover service checks but you don’t need to worry about costs from oil adjustments or other emission equipment. What’s the price of EV insurance? The cost of EV insurance ranges so best to do some research and figure out which lender is the best fit for your requirements. Take a look at Bankrate’s guide . Do I need to lease an electric vehicle? Consider if you are able to find beneficial manufacturer incentives or if you would rather change 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 credit tax incentives Electric cars are among the most expensive vehicles on the market, and until they are made available and sold, they’ll likely remain at a more expensive price. However, since manufacturers are making eco-friendly vehicles prioritizing green vehicles, as well as the federal government trying to encourage that by offering tax credits, this tax credit will not disappear anytime soon. And if you have been interested in making the switch to green for some time and are considering it now, it’s the perfect time to take action. This is especially true following President Biden’s executive order which stated that 50% of all new vehicles sold within 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 present surge in electric vehicles and also save some money by taking advantage of an available tax credit. 2022 Inflation Reduction Act Following months of debate, the 755-page Inflation Reduction Act passed and was approved by Vice President Biden on Aug. 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 legislation will likely be affecting tens of millions of Americans and will encourage more motorists to buy electric and reduce carbon emissions. The section of the law on clean vehicles indicates that the same $7,500 tax credit is available to buyers who buy an EV, but more stringent requirements for the components of the vehicle could make finding a qualifying EV difficult. The tax credit can be divided into two parts. In order for a car to be eligible for the first $3,750 and a specific amount of essential minerals used in its battery must be extracted in the U.S. or a country that there is a U.S. shares a free trade agreement. The second part of $7,500 focuses on the country where the components of the battery come from. Most components for batteries must be made in 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. Additionally, the vehicles must be assembled at North America. While this creates a challenge however, some manufacturers who no provide incentives, such as 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 eligible to offer credit. Credits for used EV tax credits Another major shift that this law has brought about is in regards to the use of EV credits for tax purposes. Drivers who aren’t in a position to buy a brand new EV can still benefit from this tax deduction. For purchases between $25,000 and $25,000, motorists 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 , explained the way the new legislation affects 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,” says Najman. In addition, a an analysis by the agency’s report found that “almost 20% of used EVs are priced at a level which is eligible and that segment that is eligible for tax credits predicted to increase in the coming year,” states Najman. “An encouraging early indicator,” says Najman, is that “already in January, approximately 50% of used cars checked with our would receive the money in return.” This means that while it may seem that tax credits have limited availability due to the recent legislation, says Najman, “in reality, the introduction of used car tax credits is already expanding its coverage and the number of people who can to buy and drive an electric vehicle.” When does the new law take force?
The new used vehicle incentive rules will apply to cars purchased after Dec. 31st, 2022. They will end the year following at the end of December. 31 2023.
The bottom line If you are considering buying a new set of wheels is upon you, consider buying a electric vehicle to help address climate change and get tax credits for electric vehicles and incentives. Before making a decision on an EV, do your homework and investigate whether there are tax credits that are still available. Also, look into the availability of charging stations in your area and based on the way you intend to utilize the vehicle, check the battery range of the model you’re interested in. It’s time to search for and compare rates and differing costs for buying EV over conventional. FAQs about EV tax credits Do leased vehicles qualify to receive tax credits for electric vehicles? Tax credit for federal residents does not apply to leased vehicles . Instead, the funds goes to the lender. But this still can lower a monthly payment in the event that the leaser chooses to factor that incentive into your lease agreement. You can mention this in order to try and save money.Certain states offer incentives that apply regardless of whether you are leasing or purchasing. What happens to the federal EV tax credit remain around? The credit will likely be around indefinitely, especially with increased pushes for more climate-aware vehicles. However, the number of vehicles that are available is continuously changing because of the phase-out system of tax credits.When an individual manufacturer has reached 200 electric vehicles manufactured to be used within the United States, those vehicles cannot be in the range of credits. This is why it is important to determine if the vehicle you intend to purchase is still available for credit. Does a family be eligible for more than one EV tax credits? In the event that two household members buy electric vehicles for themselves each, they are able to apply for the tax credit on their individual cars. If they purchase an EV together, the credit may 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 in navigating the ins and outs of securely borrowing money to buy cars. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since late 2021. They are committed to helping readers feel confident to control their finances with concise, well-researched and well-organized details that cut otherwise complicated topics into digestible pieces.
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