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9 min read Published on January 23, 2023.
Written by Rebecca Betterton 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 taking out loans to purchase an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate from late 2021. They are committed to helping readers gain the confidence to control their finances with clear, well-researched facts that break down complicated topics into bite-sized pieces. The Bankrate guarantee
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There are money-related questions. Bankrate has the answers. Our experts have been helping you manage your money for over 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 a strict code of conduct , so you can trust that our content is honest and precise. Our award-winning editors, reporters and editors provide honest and trustworthy content to help you make the right financial decisions. The content created by our editorial staff is factual, objective and uninfluenced through our sponsors. We're transparent about the ways we're able to bring quality content, competitive rates and useful tools for you , by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated for the promotion of sponsored goods or services, or through you clicking certain hyperlinks on our website. This compensation could influence the manner, place and in what order items appear in listing categories in the event that they are not permitted by law for our mortgage home equity, mortgage and other products for home loans. Other factors, like our own rules for our website and whether or not a product is available in your region or within your personal credit score may also influence how and where products appear on this site. We strive to provide the most diverse selection of products, Bankrate does not include details about every financial or credit products or services. Electric cars aren't only for those who own cars. It is now a reality for all types of people. EV market has experienced dramatic expansion over the last couple of years, with registrations increasing to 60 percent by 2022, according to . However, electric vehicle options continue to expand and offer a variety of styles, and price points. Also, it comes with a variety of benefits for saving money. Besides the obvious -- savings on gas , there are electric car tax credits for buyers of vehicles powered by electricity. Based on the state you reside in, owning an electric vehicle can help you save thousands. What exactly is an EV tax incentive? What is it? EV tax credit can be described as a financial incentive provided by the government to let you earn money back in the form of a credit, up to $7,500, when you purchase an eligible electric vehicle. Statistics on electric cars The easiest way to see how much the market has grown is to look at the most recent . Just over 7 percent of overall light-duty sales at the end of the 3rd quarter in 2022 were electric vehicles. ( ) California has the most new EV registrations on December 31, 2021 at around 39 percent. ( ) At the end of 2021 there were about 16.5 million EVs 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 highest number of charging stations, with 14,463. then New York, Florida and Texas. ( ) Tesla is the most popular electric vehicle 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 users of electric vehicles and 32 percent have indicated their desire to buy one in the coming three years. ( ) Tesla made up the majority of EV registrations during the first second quarter of 2022. ( ) Five-thirty-nine percent people are likely to purchase an EV ( ).
EV tax credit requirements The EV tax credit is a federal incentive built in order to encourage people to purchase vehicles powered by electricity. This isn't an actual check that you receive after an automobile purchase instead, it's an amount of tax credit that can range from to $7500 that you will be eligible for. This credit applies to all electric and plug-in vehicles, but specific credits are available via the U.S. Department of Energy's website . How to qualify Depending on the condition of your vehicle in order to be eligible for the incentives the 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 of 2009. It must be a brand new vehicle and not previously used. It must be a new vehicle and not lease. It must weigh between 14,000 and 14000 pounds. The battery must have a capacity of at minimum four kilowatt hours (kWh). The battery is designed for use for use in the United States. Only for personal useonly, not for resale. Use an external plug-in recharge source. If your vehicle was bought in 2023 or the following year: Purchase the battery for your personal usage, not for resales. Use it primarily for use in the U.S. You must have a battery capacity of at minimum seven kWh. You must have a vehicle weight rating of no more than 14,000 pounds. It must be made by an . Final assembly will be completed in North America. MSRP below $80,000 for vans or sport utility vehicles, pickup trucks. $55,000 is the limit for all other vehicles. If your vehicle was purchased in 2023 or later: Be an individual who bought the vehicle to use it and not for resales. Be the owner of the vehicle at first. The vehicle cannot be claimed as an dependent on someone else's tax return. Have not claimed a used clean vehicle credit in the three years prior to the purchase date. The price must be less than $25,000. Have a model year at least 2 years earlier than the calendar year when you purchase it. For instance, a vehicle purchased in 2023 would need to have a model year of 2021 or older. It must not have been transferred prior to August 16, 2022 to a qualified buyer. Have a gross vehicle weight rating of not more than 14,000lbs. You must be a FCV-compliant plug-in EV that has an energy capacity of at least 7 kWh. The battery must be used primarily inside the United States. Purchased through a dealer. Tip for Bankrate
To find where your vehicle was built, type in the VIN (vehicle identification number) on 's website. It is also crucial to remember that purchasing the car on its own does not guarantee that you will receive the tax credit. You must file with the IRS.
The tax credit for income and the EV credit Any motorist who submits the necessary information to qualify a vehicle on Form 8936 could be qualified for the EV tax credits. But amount of income your earn will affect the tax credits you receive. If you earn an amount in excess of $300,000 for married couples filing together and $225,000 for heads of household and $150,000 for all other taxpayers, you do not be eligible in tax-credits. State and local EV tax credits and incentives However, not every state provides EV tax credits and incentives. In fact, more than half of states don't have an EV tax credits program. Before you head out to purchase a charging station in your garage, think about the amount you could save in your state. EV tax credits by vehicle manufacturer Here are some of the particular EV tax credits provided by vehicle brands. Just as each state differs, consider the benefits from one vehicle brand compared to another. The brand name of your vehicle
Credit available
Information obtained from
Audi
From $4,502 to $7,500
BMW
Between $3,793 and $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
$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
Between $2,500 and $7,500
Volkswagen
$7,500
Volvo
$4,585 to $7,500
Making the decision to buy an electric vehicle is similar to buying a traditional gas vehicle and deciding to venture into the world of buying an electric car requires questioning several factors, including cost, size and practicality. However, 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 charging facilities available in my region? Before you decide to purchase an EV it is essential to confirm that there are charging stations within your vicinity. Use resources like those offered through to research options prior to buying. What's the range of your vehicle? It is important to ensure that the new range corresponds to your usual driving routine as well as any other trips you might be contemplating. What's the anticipated maintenance schedule for your vehicle? While you will need to save some money to cover service checks, you won't have to worry about expenses from oil adjustments or other emission equipment. What's the price of EV insurance? The price of EV insurance is variable, so you need to investigate and find out the 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 capable of obtaining advantageous incentives from the manufacturer or you would rather change your car every couple of years. Should I purchase a brand new vehicle or used? Weigh available incentives and your budget. The future of Tax credits for electric vehicles are one of the most expensive cars currently available. And until there are more produced and sold, they'll likely remain at a higher cost. However, as manufacturers are making green cars an important priority as well as the federal government looking to reward that by offering tax credits, this tax credit won't be disappearing any time soon. If you've been considering becoming more environmentally friendly for a while, now might be the perfect time to take action. This is especially true following President Biden's August 2021 executive order that stated that half of all new cars sold in the U.S. should be electric by 2030. Although that's an increase of a significant percentage from the present, you might 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 the 755-page Inflation Reduction Act passed and was adopted by Vice President Biden on August. 16. It carries the intent to "fight inflation and to invest in energy production and manufacturing and cut carbon emissions by roughly 40 percent in the next decade," according to a . The new legislation will likely affect tens of millions of Americans and will encourage more motorists to switch to electric vehicles and lower carbon emissions. The section of the law regarding clean vehicles suggests that the same $7,500 tax credit will be offered to buyers who buy an EV however, stricter requirements regarding the components of the vehicle could make finding a suitable EV challenging. The incentive can essentially be divided in two parts. For a vehicle to qualify for the first $3,750 and a specific proportion of the minerals that are used in its battery must be mined in the U.S. or a country that there is a U.S. shares a free trade agreement. The second portion of $7,500 involves the country where the components of the battery come from. Most battery components must be manufactured from 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 all components. Furthermore, the cars must be built in North America. While this creates a challenge, many manufacturers that no provide incentives, such as Tesla and GM will be able to restart. The legislation removes the limit on the number of EVs sold. Previously, manufacturers that sold 200 vehicles could no longer be eligible to offer credit. Tax credits for used EV tax credits Another significant change that has occurred since the legislation was passed is in regards to the use of EV tax credits. Drivers who aren't in a position to buy a brand new EV are still eligible for this tax deduction. For purchases up to $25,000, buyers can receive a tax credit that is up to 30 percent of the purchase price with a limit of $4,000. Liz Najman, leader of policy research at , explained the way the new legislation affects buyers of cars. "Many automobile buyers within America are now eligible for rebates. U.S. can now receive up to $4,000 for a used vehicle that has a price less than the $25,000 threshold," says Najman. Additionally, a recent research from the agency's report revealed that "almost 20 percent of used EVs are priced at a level that would be eligible, and that share that is eligible for tax credits only expected to grow in the coming season," says Najman. "An positive early sign," says Najman, is that "already in January, about 50% of the used vehicles tested by our agency would be eligible for some amount of money in return." So while it may seem that tax credits have limited access due to recent legislation, according to Najman, "in reality, the inclusion of used cars in tax credits is already expanding its coverage and the number of drivers who are able to purchase and drive an electric vehicle." When will the new legislation take force?
Updated used vehicle incentive regulations will be applicable to vehicles purchased after Dec. 31, 2022 and end the year following on Dec. 31 2023.
The bottom line If the time to purchase new wheels is upon you, consider buying a electric vehicle in order to tackle climate change and benefit from EV tax credits and incentives. Before deciding on a particular EV make sure you do your research and find out if tax credits 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, confirm the battery range of the vehicle you're considering. When it comes time to compare rates and differing prices for purchasing EVs over traditional. FAQs about EV tax credits Are leased cars eligible to receive tax credits for electric vehicles? Federal tax credits will not apply to these . Instead, the funds is paid to the leaser. But this still can lower the monthly installment in the event that the leaser decides to include the incentive into the lease agreement. You can mention this in order to try and save money.Certain states offer incentives that apply regardless of whether you're leasing or buying. Will you see the Federal EV tax credit always be available? The credit will likely remain for the foreseeable future, particularly when there is a push to make climate-conscious vehicles. However, the number of vehicles that are available is continuously changing because of the phase-out system of tax credits.When a particular manufacturer reaches 200 electric vehicles manufactured to be used within the United States, those vehicles are not qualified for tax credits. Because of this rule, it is important to determine if the vehicle you intend to buy is still eligible to be financed. Can a household receive multiple EV tax credit? When two people in the household buy electric vehicles for themselves each, they are able to claim the credit for their own vehicles. If the two buy an EV jointly it 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 with the ins and outs of securely taking out loans to purchase a car. 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 to control their finances by providing precise, well-studied facts that break down complicated subjects into bite-sized pieces.
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