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 choices by providing you with interactive financial calculators and tools, publishing original and objective content, by enabling you to conduct research and analyze information for free – so that you can make financial decisions with confidence. Bankrate has partnerships 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 site are from companies that compensate us. This compensation could affect how and when products are featured on this website, for example such things as the sequence in which they appear in the listing categories and other categories, unless prohibited by law. Our loans, mortgages, and other products for home loans. But this compensation does not influence the content we publish or the reviews that you see on this site. We do not include the universe of companies or financial offerings that might be available to you. mseidelch/Getty Images
9 minutes read. Published January 23, 2023
Authored 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 ways and pitfalls of borrowing money to purchase cars. The article was edited 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 by providing precise, well-studied facts that break down complicated subjects into digestible pieces. The Bankrate promise
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You have money questions. Bankrate has answers. Our experts have helped you understand your money for over four years. We continually strive to give our customers the right guidance and the tools necessary to be successful throughout their financial journey. Bankrate adheres to a strict code of conduct policy, which means you can be confident that our content is honest and reliable. Our award-winning editors and reporters provide honest and trustworthy information to assist you in making the right financial decisions. The content created by our editorial team is factual, objective and uninfluenced by our advertisers. We’re open regarding how we’re able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for the promotion of sponsored goods andservices or through you clicking certain links posted on our website. So, this compensation can affect the way, location and in what order products are listed, except where prohibited by law for our mortgage, home equity and other home lending products. Other elements, such as our own rules for our website and whether or not a product is offered in your area or at your own personal credit score may also influence the way and place products are listed on this site. Although we try to offer an array of offers, Bankrate does not include details about every credit or financial item or product. Electric vehicles are no longer only for those who own cars. In fact, the EV market has seen a dramatic growth in the last few years, and registrations have increased by 60 percent throughout 2022, according to . In the meantime, electric vehicle options continue to diversify and now come in a range of designs, styles and prices. Also, it comes with a variety of money-saving perks. In addition to the obvious cutting down on gas , there are tax credits available to people who buy the electric car. Depending on your home state the electric car you own can save you thousands. What is an EV tax credits? The EV tax credit is a financial incentive provided by the federal government to allow you to earn money to repay in the shape of a credit, up to $7,500, if you purchase an electric vehicle that is qualified. Statistics on electric cars The simplest method of determining how the market has expanded is to look at recent . Just over 7 percent of all light-duty sales in 30th of March 2022 was electric vehicles. ( ) California has the highest percentage of new EV registrations as of Dec. 31, 2021 with around 39 percent. ( ) At the end of 2021 there were about 16.5 million EVs in circulation. ( ) Nearly half of Americans are interested in buying or leasing an EV which is up by 10 percent over 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 vehicle among American consumers. ( ) fifty-three percent of those who aren’t interested in EVs are concerned about the hassle associated with charging their vehicle. ( ) Gen Z are the earliest adopters of electric vehicles with 32 percent indicating they would like to purchase one in the coming three years. ( ) Tesla made up 68 percent of all EV registrations in the first part of 2022. ( ) Five-thirty-nine percent customers are either extremely or somewhat likely to buy 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 an actual check that you receive after the purchase of a car instead, it’s a tax credit worth up to $7500 that you will be eligible for. This tax credit is applicable to all plug-in and electric vehicles, but specific credits are available via the U.S. Department of Energy’s website . What is the criteria for qualifying? Depending on the year of manufacture of your car, to qualify for available incentives your vehicle must meet certain specifications. If your vehicle was purchased in 2022 or prior to: Have been purchased within the last 12 months of December 31 of 2009. Must be a new vehicle that is not being used. Must be a purchased vehicle and not lease. The weight rating must be 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. For your own useonly, not for resale. Use an external plug-in recharge source. If the vehicle you purchased was bought in 2023 or after: Purchase it for your own useand not to resell. Make use of it mostly for use in the U.S. The battery must have a capacity of at least 7 kWh. A vehicle’s gross weight rating of less than 14,000 pounds. Be made by an . Undergo final assembly in North America. MSRP less than $80,000 for vans as well as sport utility vehicles and pickup trucks. $55,000 is the limit for other types of vehicles. If your vehicle was bought in 2023 or later You must be an individual who bought the vehicle solely for use and not to resell. You must not be the original owner. It is not possible to claim as dependent on another’s tax return. Not claimed another credit for a clean vehicle in the last 3 years prior to the date of purchase. The price must be $25,000 or less. Model year must be that is at least two years older than that of the calendar in which you purchase it. For instance, a vehicle purchased in 2023 would need a model that was 2021 or more. Have not been transferred between August 16, 2022 to a buyer who is qualified. Have a gross vehicle weight of not more than 14,000lbs. Be an eligible FCV or plug-in electric vehicle with the capacity of a battery of at least seven kWh. Be for use primarily within the United States. Purchased from an agent. Tip for Bankrate
To determine where your car was built, type in the VIN (vehicle identification number) on ‘s website. It is also crucial to keep in mind that buying the vehicle alone does not ensure that you get your tax credits. It is necessary to file a tax return your tax return with IRS.
The tax credit for income and the EV credit Any driver who submits the necessary information for a qualified vehicle by using Form 8936 could be eligible to receive the EV tax credits. However, the amount you earn can impact the tax credits you receive. If you earn a certain amount of money, more than $300,000 for married couples filing together or 225,000 for head of household and $150,000 for the rest of the filers, you will not qualify for tax credits. State and local EV tax incentives and tax credits There are many states that do not provides EV tax incentives and tax credits. In fact, over half of states in the country don’t offer any EV tax credit program. Before you head out to purchase a charging station for your garage, consider how much you can save in your home state. EV tax credits by vehicle manufacturer Here are some of the particular EV tax credits provided by vehicle brands. As with every state, consider the benefits from one brand of vehicle versus another. Vehicle brand
Information obtained from
From $4,502 to $7,500
$3,793 to $7,500
No longer eligible
Between $4,007 and $7,500
Between $3,626 and $7,500
From $4,543 to $7,500
Between $6,295 and $7,500
$4,543 to $7,500
$3,501 to $7,500
$5,836 to $7500
Between $3,667 and $7,500
$4,502 to $7,500
No longer eligible
$2,500 to $7,500
Between $4,585 and $7,500
Making the choice to purchase an electric vehicle, just like buying a traditional gas car, deciding to dive into the world of electric vehicle buying requires questioning several factors, like cost, size and practicality. But purchasing an EV needs 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 purchase an EV, it is important to ensure that there are available charging stations within your vicinity. Utilize resources such as those available through to research options prior to purchasing. What’s the car’s range? You will need to confirm that the range of your new car is compatible with your normal driving habits — and any trips you’re planning. What’s the planned maintenance of your vehicle? Although you’ll need to set aside some cash for service checks but you don’t need to worry about expenses from oil changes or other emissions equipment. What’s the price of EV insurance? The cost of EV insurance ranges so best to investigate and find out the lender is the best fit for your needs. Check out Bankrate’s guide to . Should I lease an electric vehicle? Consider if you are able to find advantageous incentives from the manufacturer or you would rather change your vehicle every few years. Should I buy new or used? Consider incentives available and your budget. The future of Tax credits for electric vehicles are still one of the most expensive cars available, and until there are more produced in the near future, they’ll remain at a higher cost. However, as manufacturers are making green vehicles an important priority while the state is looking to encourage that by offering tax credits, this tax credit won’t be disappearing any time soon. And if you have been considering becoming more environmentally friendly for a while and are considering it now, it’s the perfect time to take action. This is particularly true in light of President Biden’s executive order which stated that 50% of all new cars sold within the U.S. should be electric by 2030. Although that’s a steep percentage jump from the present, you might be able to take advantage of the current surge of electric cars and save money with an tax credit that is available. 2022 Inflation Reduction Act Following months of debate and debate, the 755-page Inflation Reduction Act passed and was approved by President Biden on Aug. 16. It is designed to “fight inflation and to invest in energy production and manufacturing and cut carbon emissions by around 40 percent by 2030,” 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 legislation regarding clean vehicles suggests that the same $7,500 tax credit is available to those who purchase an EV however more stringent requirements for the car’s components could make finding a qualifying EV challenging. The tax credit can be divided in two parts. For a vehicle to qualify for the first $3,750 the proportion of the minerals that are used in its battery must be extracted in the U.S. or a country that it is U.S. shares a free trade agreement. The second part of $7,500 is about the location where the battery’s components originate from. The majority of battery components have to be manufactured within Canada, the U.S., Canada or Mexico. The required percentages of critical minerals will be increasing every year between 2024 and 2026, and until 2028 for all components. Additionally, the vehicles must be built at North America. Although this poses a challenge for some companies that do not longer offer incentives, like Tesla and GM will be able to restart. The legislation removes the limit on the number of EVs sold. Manufacturers who sold 200 vehicles could no longer be able to offer credits. Tax credits for used EV tax credits Another significant shift following this legislation is in regards to the use of EV tax credits. Drivers who may not be financially able to purchase a new EV can still benefit from this tax deduction. When costing up to $25,000, drivers get a tax deduction that is up to 30 percent of the purchase price with a maximum of $4,000. Liz Najman, leader of the ‘Policy Research’ department at, discussed how the new legislation affects car buyers. “Many people who buy cars across the U.S. can now receive up to $4,000 in rebates on used electric vehicles that has a price less than $25,000.” explains Najman. In addition, a recent research from the agency’s report found that “almost 20 percent of used EVs have a price which is eligible and that share that is eligible for tax credits only likely to expand this calendar year” says Najman. “An positive early sign,” says Najman, is that “already in January, about 50% of cars that were inspected by us would get the money back.” So while it might appear that tax credits are limited in availability following the recent legislation, according to Najman, “in reality, the introduction of used car tax credits is already expanding its coverage and the number of people who can to purchase and drive an EV.” When does the new legislation take effect?
New used vehicle incentive rules will apply to cars purchased after Dec. 31, 2022. They will end the year following on Dec. 31 2023.
The main point is that if the time to purchase new wheels is near, consider buying a electric vehicle to combat climate change and get tax credits for electric vehicles and incentives. Before making a decision on an EV, do your homework and determine if there are tax credits available. It’s also important to examine the availability of charging stations in your area and based on the way you plan to use the vehicle, verify that the battery’s range is the same for the vehicle you’re considering. When it comes time to search for and examine rates and different costs of buying an EV instead of traditional. Questions about tax credits for electric vehicles Do vehicles leased by the owner qualify to receive an EV tax credit? Federal tax credits will not apply to those . Instead, the funds is paid to the leaser. This can, however, reduce the monthly payments in the event that the leaser decides to incorporate the incentive into the lease agreement. Mention this during to try saving money.Certain states offer incentives that are available regardless of whether you are leasing or buying. What happens to this federal EV tax credit be in use? The credit is likely to remain in place for a long time, particularly when there is a push to make climate-aware 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 200 electric vehicles manufactured to be used in the United States, those vehicles are not eligible for credits. Due to this, it’s important to check if the vehicle you intend to purchase is available for credit. Are families able to get more than one EV tax credit? When two people in the household buy electric vehicles for themselves, they can separately apply for the tax credit on the cars they own. If two people purchase an EV together it can only be claimed one time.
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 borrowing money to purchase an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since the end of 2021. They are dedicated to helping their readers feel confident to take control of their finances by providing clear, well-researched details that cut otherwise complicated subjects into bite-sized pieces.
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