EV tax credit: What to know before you buy Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our mission is to help you make better financial decisions by offering interactive financial calculators and tools, publishing original and objective content. This allows you to conduct your own research and compare information for free - so that you can make your financial decisions with confidence. Bankrate has agreements with issuers, including 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 are from companies that compensate us. This compensation could affect how and where products appear on this site, including, for example, the order in which they appear within the listing categories and other categories, unless prohibited by law. Our loan products, such as mortgages and home equity and other home lending products. However, this compensation will not influence the information we publish, or the reviews that appear on this website. We do not cover the vast array of companies or financial deals that could be available 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 assisting readers to navigate the details of borrowing money to buy cars. 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 committed to helping readers gain confidence to control their finances by providing precise, well-studied information that breaks down complex topics into manageable bites. The Bankrate promises
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You have money questions. Bankrate has the answers. Our experts have been helping you manage your money for more than four years. We strive to continuously provide consumers with the expert guidance and the tools necessary 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 provide honest and trustworthy content that will help you make the right financial choices. Our content produced by our editorial staff is objective, truthful and is not influenced by our advertisers. We're transparent about how we are able to bring quality content, competitive rates and useful tools to our customers by describing how we earn our money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for placement of sponsored products andservices or through you clicking specific links on our site. So, this compensation can influence the manner, place and when products are listed and categories, unless it is prohibited by law. This is the case for our mortgage, home equity and other products for home loans. Other factors, such as our own website rules and whether or not a product is available in the area you reside in or is within your own personal credit score may also influence how and where products appear on this website. We strive to provide an array of offers, Bankrate does not include the details of each credit or financial product or service. Electric cars aren't exclusive to car owners. The EV market has seen a dramatic growth over the past few years, and registrations have increased by 60 % through 2022, as per . In the meantime electric vehicle options are expanding and currently offer a variety of styles, and prices. Also, it comes with a variety of savings benefits. Apart from the obvious savings on gas -- there are tax credits for those who purchase vehicles powered by electricity. Depending on your home state, owning an electric vehicle could save you thousands. What exactly is what is the EV tax credits? What is it? EV tax credit works as a tax incentive provided by the government that will allow you to earn money from the back of an amount of credit, which can be as high as $7,500, when you purchase an eligible electric vehicle. Statistics on electric cars The simplest method to determine how the market is growing is to look at recent . Seven percent or less of all light-duty sales as of the 3rd quarter in 2022 were electric vehicles. ( ) California has the most new EV registrations as of the end of December 2021, with approximately 39 percent. ( ) At the end of 2021, there would be 16.5 million electric vehicles in circulation. ( ) Nearly half of Americans are considering buying or leasing an electric vehicle which is up by 10 percent over last year. ( ) California has the most charging stations with 14,463, followed by New York, Florida and Texas. ( ) Tesla is the most loved electric vehicle by American customers. ( ) Fifty-three percent of people who are not interested in EVs are concerned about the hassle associated with charging their vehicle. ( ) Gen Z are the first users of electric vehicles and 32 percent have indicated their interest in buying one within the next three years. ( ) Tesla made up 68 percent of all EV registrations in the first part of 2022. ( ) fifty-nine percent of customers are either extremely or somewhat likely to purchase an EV ( ).
EV tax credit requirements EV tax credits are a government incentive created in order to encourage people to purchase the electric car. The incentive isn't the kind of check you get in the mail following a vehicle purchase, but rather the tax credit of up to $7,500 that you become eligible to receive. The credit is available to all plug-in and electric vehicles, but specific credit amounts can be found via the U.S. Department of Energy's website . What criteria to be considered for qualifying based on the condition of your vehicle, to qualify for available incentives, your vehicle must meet certain requirements. If you purchased your car in 2022 or prior to it was purchased on or after December 31 of 2009. It must be a brand new vehicle, not used. Must be a purchased vehicle, not leased. It must weigh upwards of 14,000lbs. Hold a battery capacity of at minimum four kilowatt hours (kWh). It is intended for use exclusively in the United States. For your own usage, not to be sold. Make use of an external recharge source. If the vehicle you purchased was purchased in 2023 of after: Buy it solely for personal usage, not for resales. Use it primarily within the U.S. You must have a battery capacity of at minimum seven kWh. You must have a vehicle weight rating of less than 14000 pounds. It must be made by an . Final assembly will be completed within North America. MSRPs below $80,000 for vans or sport utility vehicles, pickup trucks and $55,000 for other types of vehicles. If your used vehicle was purchased in 2023 or earlier the date of purchase: You must be an individual who bought the vehicle solely for use and not for resale. Not be the original owner. It is not possible to claim as a dependent on another person's tax return. Not have claimed another used clean vehicle credit within the 3 years before the date of purchase. Have a sale price of less than $25,000. You must have a model year that is at least two years earlier that the year at the time you purchase it. For instance, a car bought in 2023 will require an model that was 2021 or more. It must not have been transferred after the 16th of August, 2022 to a qualified buyer. The vehicle must have a weight rating of under 14,000 pounds. You must be a FCV-compliant plug-in EV with a battery capacity of at least 7 kWh. Be for use primarily inside the United States. It can be purchased through a dealer. Tip for Bankrate
To find where your vehicle was made, simply enter your VIN (vehicle identification number) on the website of's. It is also important to note that purchasing the car on its own does not guarantee you'll get an income tax deduction. You must file an application with IRS.
The tax credit for income and the EV credit Any motorist who submits the required information for a qualified vehicle by using Form 8936 might be qualified to receive an electric vehicle tax credit. However, the amount you earn can impact the tax credits you are eligible for. If you make some amount in excess of $300,000 for married couples filing jointly or $225,000 for heads of household and $150,000 for the rest of the taxpayers, you won't qualify for tax credits. State and local EV tax incentives and tax credits However, not every state offers EV tax incentives and tax credits. In fact, over half the states in the country don't have an EV tax credits program. So, before you set out to buy an electric charging station for your garage, determine the amount you could save in your home state. EV tax credits based on vehicle brand Here are some special EV tax credits that are offered by the various brands of vehicles. Just as each state differs, consider the benefits from one brand of vehicle versus another. Brand name of the vehicle
Credit is 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
Between $4,007 and $7,500
Honda
From $3,626 to $7500
Hyundai
Between $4,543 and $7,500
Jaguar/Land Rover
From $6,295 to $7,500
Kia
From $4,543 to $7,500
Mercedes
$3,501 to $7,500
Mitsubishi
Between $5,836 and $7,500
Nissan
$7,500
Porsche
Between $3,667 and $7,500
Subaru
$4,502 to $7,500
Tesla
No longer eligible
Toyota
Between $2,500 and $7,500
Volkswagen
$7,500
Volvo
$4,585 to $7,500
The decision to purchase an electric vehicle, just like buying a traditional gas vehicle, deciding to dive into the world of buying an electric car will require you to consider a number of aspects, such as cost, size and practicality. But purchasing an EV requires extra thought. Here are some questions to think about before you decide whether to buy an electric vehicle. Are charging facilities available in my local area? Before you purchase an EV it is essential to confirm that there are charging stations in your region. Use resources like those offered through to research options prior to buying. What is the vehicle range? You'll need to verify that the range of your new car corresponds to your usual driving routine as well as any other trips you're planning. What is the expected vehicle maintenance? While you'll have 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 is variable, so you need to investigate and find out which lender is the best fit for your needs. Find Bankrate's advice on . Should I lease an EV? Think about if you're in a position to get beneficial manufacturer incentives or if you prefer to change your car every couple of years. Should I purchase a brand new vehicle or used? Take a look at incentives available and consider your budget. The future of EV tax credits Electric vehicles are still some of the most expensive vehicles available, and until there are more produced, they will predictably stay at a higher cost. But because manufacturers are making eco-friendly vehicles prioritizing green vehicles and the government is trying to reward that with tax credits, it is likely that the tax credit will not disappear in the near future. And if you have been interested in making the switch to green for some time it's an ideal time to start. This is particularly true in light of the executive order stating that half of all new vehicles that are sold across the U.S. should be electric by 2030. Although that's an increase of a significant percentage from where you are today, you could be able to make the most of the present surge in electric vehicles and save money with an available tax credit. 2022 Inflation Reduction Act Following months of deliberation, the 755-page Inflation Reduction Act passed and was adopted in the presence of President Biden on Aug. 16. The legislation aims to "fight inflation and to invest in energy production and manufacturing and reduce carbon emissions by roughly 40 percent by 2030," according to a . The new legislation will likely affect tens of millions of Americans and encourage more drivers to go electric, and help reduce carbon emissions. The legislation on clean vehicles indicates that the same tax credit will be available to those who purchase an EV however, more stringent requirements for the car's components could make finding a suitable EV challenging. The incentive is split in two parts. For a vehicle to qualify for the initial $3,750 incentive and a specific percentage of critical minerals utilized in its battery have to be extracted from the U.S. or a country with which the U.S. shares a free trade agreement. The second part of $7,500 is about the country where the components of the battery come from. Most components for batteries must be manufactured in the U.S., Canada or Mexico. The required percentages of critical minerals will rise each year , from 2024 to 2026, and will continue until 2028 for components. Furthermore, the cars must be assembled in North America. While this creates a challenge however, some manufacturers who no longer offer incentives, like Tesla and GM, will be able to resume. The law removes the restriction on the amount of EVs sold. Previously, manufacturers that sold more than 200,000 vehicles would not be eligible for credits. Tax credits for used EV tax credits Another major shift that this law has brought about pertains to the use of EV tax credits. Drivers who may not be able to afford a brand-new EV can still benefit from this tax deduction. For purchases between $25,000 and $25,000, motorists are eligible for a tax credit of up to 30 percent of the cost of purchase, with a maximum of $4,000. Liz Najman, leader of policy research at , explained the way the new legislation affects buyers of cars. "Many people who buy cars within America are now eligible for rebates. U.S. can now receive up to $4,000 back on used electric vehicles with a purchase price below the $25,000 threshold," states Najman. In addition, a an analysis by the agency's report found that "almost 20 percent of used EVs are priced at a level that is eligible and that share of the market is only predicted to increase this year," Najman says. Najman. "An encouraging early indicator," says Najman, is that "already in January, approximately 50% of used cars checked with our would receive some money back." So while it could 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 scope and the number of drivers who are able to own and operate an electric vehicle." When does the new legislation go into force?
Updated used vehicle incentive regulations are applicable to vehicles bought after December. 31, 2022. These regulations will expire on Dec. 31 2023.
The bottom line If the time to purchase a new set of wheels is near, consider buying a electric vehicle to combat 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 investigate whether there are tax credits that are still available. It's also important to investigate the charging stations available in your local area. Also in relation to how you intend to utilize the vehicle, confirm the battery capacity of the EV you're interested in. When it comes time to examine rates and different costs for buying EV instead of traditional. FAQs about EV tax credits Do vehicles leased by the owner qualify for tax credits for electric vehicles? The federal tax credit will not apply to those . Instead, that money goes to the lender. But this still can lower a monthly payment -- if the lessor chooses to factor that incentive into the lease agreement. You can mention this in order to try and save money.Certain states offer incentives that are applicable regardless of whether you're leasing or purchasing. Will the federal EV tax credit always be in use? The credit will likely remain for the foreseeable future, particularly when there is a push to make climate-conscious vehicles. But the available vehicles are constantly shifting due to the phase-out system of tax credits.When the manufacturer of a specific model reaches the 200,000 electric vehicles that are sold to be used within the United States, those vehicles are no longer qualified for tax credits. Due to this, it's important to check whether the car you want to purchase is still available for credit. Can a household be eligible for more than one EV credit tax deductions? If two members of the same household buy electric vehicles for their own and then claim credit for their own vehicles. If two people purchase an EV together it can only be claimed one time.
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Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She has a specialization in helping readers to navigate the details of borrowing money to buy an automobile. 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 feel confident to take control of their finances through providing precise, well-studied facts that break down complicated topics into digestible pieces.
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