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 offering interactive tools and financial calculators that provide objective and unique content. We also allow you to conduct research and compare information without cost, so that you can make your 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 Make money The products that appear on this website are provided by companies that pay us. This compensation could affect how and where products appear on this website, for example such things as the order in which they may appear in the listing categories and other categories, unless prohibited by law. This applies to our mortgage, home equity and other products for home loans. But this compensation does affect the content we publish or the reviews appear on this website. We do not cover the entire universe of businesses or financial deals that could be available to you. mseidelch/Getty Images
9 min read Published January 23, 2023
Written by Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She specializes in helping readers in navigating the ins and outs of securely borrowing money to buy a car. 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 confidence to manage their finances by providing precise, well-studied information that breaks down otherwise complicated subjects into digestible pieces. The Bankrate promises
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If you have questions about money. Bankrate has answers. Our experts have helped you understand your finances for more than four decades. We are constantly striving to provide consumers with the expert advice and tools needed 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 information is trustworthy and reliable. Our award-winning editors and journalists create honest and accurate content to help you make the right financial choices. The content we create by our editorial team is factual, objective and uninfluenced by our advertisers. We’re honest regarding how we’re in a position to provide quality content, competitive rates, and helpful tools to you , by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the promotion of sponsored goods or services, or when you click on specific links on our website. So, this compensation can influence the manner, place and in what order products appear in listing categories and categories, unless it is prohibited by law. This is the case for our mortgage or home equity products, as well as other products for home loans. Other elements, such as our own website rules and whether or not a product is offered in the area you reside in or is within your own personal credit score can also impact the way and place products are listed on this website. We strive to provide an array of offers, Bankrate does not include the details of each credit or financial item or product. Electric vehicles are no longer exclusive to car owners. The EV market has seen a dramatic growth in the last few years, and registrations have increased by 60 % through 2022, as per . In the meantime, electric vehicle options continue to expand and include a wide selection of designs, styles and price points. Also, it comes with a variety of money-saving perks. Besides the obvious — savings on gasoline, there are electric car tax credits available to buyers of an electric vehicle. It is contingent on your state of residence having an electric car could save you thousands. What exactly is an EV tax credit? It is the EV tax credit works as a financial incentive created by the government that will allow you to earn cash from the back of credits, up to $7,500, if you buy a qualified electric vehicle. Statistics on electric cars The simplest way to see how much the market is growing is to examine the most recent . About 7 percent of all light-duty sales in the third quarter of 2022 was electric vehicles. ( ) California has the highest percentage of new EV registrations on Dec. 31, 2021 with approximately 39 percent. ( ) In the year of 2021, there were 16.5 million electric vehicles driving around. ( ) Around fifty percent of Americans are interested in buying or leasing an electric vehicle which is up by 10 percent over last year. ( ) California has the most charging stations with 14,463, which is followed by New York, Florida and Texas. ( ) Tesla is the most loved electric vehicle by American consumers. ( ) 53 percent of people who are not interested in EVs fear the inconvenience of charging their vehicles. ( ) Gen Z are the first users of electric vehicles, with 32 percent noting their interest in buying one in the next three years. ( ) Tesla made up 70% of all EV registrations in the first second quarter of 2022. ( ) Five-thirty-nine percent people are likely to purchase an EV ( ).
EV tax credit requirements EV tax credit was a Federal incentive designed to motivate drivers to buy the electric car. This incentive is not a check you receive in the mail following the purchase of a car and is instead the tax credit of up to $7,500 that you become eligible to receive. This tax credit is applicable to all plug-in or electric vehicles, however specific credits are available through 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 has to meet certain criteria. If you purchased your car in 2022 or before it was purchased on or after December 31 in 2009. It must be a brand new vehicle that is not being used. The vehicle must be purchased that is not lease. Have a weight rating of upwards of 14,000lbs. The battery must have a capacity of at least four Kilowatt hours (kWh). It is intended for use exclusively in the United States. Only for personal use, not for resale. Make use of an external recharge source. If your new vehicle was purchased in 2023 of after: Buy it for your own useand not to resell. Use it primarily within the U.S. Have a battery capacity of at minimum seven kWh. A vehicle’s gross weight rating of no more than 14,000 pounds. The vehicle must be manufactured by a . Final assembly will be completed in North America. MSRP 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 after: Be an individual who bought the vehicle to use it and not for resales. You must not be the original owner. The vehicle cannot be claimed as dependent on another’s tax return. Have not claimed a used credit for a clean vehicle in the 3 years before the purchase date. The price must be less than $25,000. Have a model year at least two years earlier than the calendar year when you purchase it. For example, a vehicle that you purchase in 2023 must have to have a model that was 2021 or more. Not have already been transferred prior to august 16, 2022, to a qualified buyer. Have a gross vehicle weight rating of not more than 14,000lbs. Be an eligible FCV or plug-in EV that has a battery capacity of at least seven kWh. Be for use primarily within the United States. Be bought by an authorized dealer. Bankrate tip
To find where your vehicle was built, type in your VIN (vehicle identification number) on the website of’s. It is also crucial to keep in mind that buying the vehicle alone does not ensure that you get an income tax deduction. It is necessary to file a tax return with the IRS.
Taxes on income and the EV tax credit Any motorist who submits the required information to qualify a vehicle on Form 8936 might be qualified to receive an EV tax credit. But amount of income your earn will affect the tax credits you are eligible for. If you earn an amount, more than $30,000 for married couple filing jointly or the heads of households and $150,000 for all other taxpayers, you won’t be eligible to receive tax credit. State and local EV tax credits and incentives However, not every state offers EV incentives and tax credits. In fact, more than half of the states in the country don’t have any EV tax incentive program. Before you head out to purchase an electric charging station for your garage, determine the amount you could save in your home state. EV tax credits by vehicle manufacturer Here are some of the specific EV tax credits provided by vehicle brands. As with every state and offers different benefits, think about the benefits of one vehicle brand to other. Brand name of the vehicle
Credit available
Information gathered 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
Between $6,295 and $7,500
Kia
From $4,543 to $7,500
Mercedes
$3,501 to $7,500
Mitsubishi
$5,836 to $7500
Nissan
$7,500
Porsche
Between $3,667 and $7,500
Subaru
From $4,502 to $7,500
Tesla
No longer eligible
Toyota
Between $2,500 and $7,500
Volkswagen
$7,500
Volvo
From $4,585 to $7,500
Making the decision to buy an EV Just as with buying a traditional gas car, deciding to dive into the world of buying an electric vehicle requires questioning several factors, like price, size, and practicality. But buying an EV takes extra consideration. Here are a few questions to ask yourself before deciding whether you want to purchase an electric vehicle is the right choice for you. Are there charging stations in my area? Before you purchase an EV it is essential to verify that there are charging stations within your vicinity. Utilize resources such as those available through to research options prior to buying. What’s the range of your vehicle? You’ll need to verify that the range of your new car fits your typical driving routine and any excursions you’re thinking of. What’s the anticipated maintenance schedule for your vehicle? While you’ll have to reserve some cash to pay for checks on service but you don’t need to worry about costs from oil changes or other emissions equipment. How much is EV insurance? The price of EV insurance ranges so best to investigate and find out the lender is the best fit for your requirements. Find Bankrate’s advice on . Should I lease an electric vehicle? Consider if you are in a position to get advantageous incentives from the manufacturer or you prefer to change your vehicle every few years. Should I purchase a brand new vehicle or used? Weigh available incentives and your budget. The future of EV Tax credits for electric vehicles are still among the most expensive vehicles available, and until there are more produced, they will predictably stay at a higher cost. However, as manufacturers are making green cars an important priority while the state is looking to encourage that by offering tax credits, this tax credit will not be vanishing in the near future. And if you have been considering becoming more environmentally friendly for a while it’s a good time to act. This is especially true following President Biden’s August 2021 executive order stating that half of all new cars sold across the U.S. should be electric by 2030. While this is a steep percentage jump from the present, you might benefit of the current surge of electric cars and save extra money through an available tax credit. 2022 Inflation Reduction Act Following months of debate and debate, the 755-page Inflation Reduction Act passed and was adopted in the presence of President Biden on Aug. 16. It is designed to “fight inflation, invest in domestic 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 could encourage more drivers to go electric, and help reduce carbon emissions. The part of 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 components of the vehicle could make finding a suitable EV challenging. The incentive is split in two parts. To be eligible for the initial $3,750 amount and a specific percentage of critical minerals used in its battery must be extracted in the U.S. or a country that the U.S. shares a free trade agreement. The second half of the $7,500 is about where the battery components come from. Most battery components must be manufactured within the U.S., Canada or Mexico. The minimum percentage of critical minerals will be increasing each year , from 2024 to 2026, and until 2028 for components. Furthermore, the cars must be built within North America. Although this poses a challenge however, some manufacturers who no longer offer incentives, like Tesla and GM will be able to return. The law removes the restriction on the amount of EVs sold. Manufacturers who sold more than 200,000 vehicles would not be eligible for credit. Credits for used EV tax credits Another significant shift following this legislation concerns the use of EV tax credits. Drivers who aren’t in a position to buy a brand new EV are still eligible for the tax credit. If the vehicle costs between $25,000 and $25,000, motorists get a tax deduction of up to 30 percent of the purchase price, with a $4,000 cap. Liz Najman, leader of policy research at , explained the way 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 for a used vehicle that has a price less than $25,000,” explains Najman. Additionally, a an analysis by the reporting agency found that “almost 20% of used EVs are priced at a level that is eligible and that segment of the market is only predicted to increase this year,” says Najman. “An optimistic early indicator,” says Najman, is that “already in January, approximately 50% of the used vehicles checked with our would receive some money back.” This means that while it might appear that tax credits are limited in access due to recent legislation, according to Najman, “in reality, the inclusion of used cars in tax credits is already expanding their scope and the number of drivers who are able to buy and drive an EV.” When does the new legislation go into effect?
The new used vehicle incentive rules will apply to cars purchased after December. 31st, 2022 and end the year following at the end of December. 31 2023.
The main point is that if the time to buy a new set of wheels is near, consider buying a electric vehicle in order to tackle climate change and get tax credits for electric vehicles and incentives. Before making a decision on an EV make sure you do your research and investigate whether there are tax credits that are still available. It’s also essential to investigate the availability of charging stations in your local area. Also, depending on how you plan to use the vehicle, verify that the battery’s range is the same for the EV you’re interested in. When the time comes to search for and compare rates and differing prices for purchasing EVs over traditional. FAQs about EV tax credits Do vehicles leased by the owner qualify for tax credits for electric vehicles? Federal tax credits will not apply to leased vehicles . Instead, that money goes to the lender. But this still can lower the monthly installment — if the lessor decides to include the incentive into the lease agreement. You can mention this in order to try and save money.Certain states have incentives that are applicable regardless of whether you are leasing or buying. What happens to this federal EV tax credit always be in use? The credit will likely remain for the foreseeable future, particularly due to the increased demand for climate-conscious vehicles. However, the number of vehicles that are available is continuously changing because of the phase-out structure of tax credits.When a particular manufacturer reaches 200 electric vehicles manufactured to be used within the United States, those vehicles cannot be in the range of credits. Because of this rule, it’s important to check whether the car you want to buy is still eligible to be financed. Can a household receive multiple EV tax credits? In the event that two household members purchase electric automobiles for themselves and then apply for the tax credit on their own vehicles. If two people purchase an EV jointly 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 has a specialization in helping readers to navigate the ins and outs of securely borrowing money to purchase an automobile. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are passionate about helping readers feel confident to take control of their finances by providing precise, well-studied details that cut complicated topics into digestible pieces.
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