EV tax credit: What to know before you buy Advertiser Disclosure Advertiser Disclosure We are an independent, advertising-supported comparison service. Our goal is to help you make better financial decisions by offering interactive tools and financial calculators that provide objective and unique content, by enabling you to conduct your own research and compare information at no cost – so 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 Make Money The offers 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 be listed within the categories of listing and other categories, unless prohibited by law. This applies to our loan products, such as mortgages and home equity and other home loan products. This compensation, however, does have no impact on the content we publish or the reviews that you read on this site. We do not include the universe of companies or financial offers that may be accessible to you. mseidelch/Getty Images
9 min 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 assisting readers in navigating the details of borrowing money to buy 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 committed to helping readers gain the confidence to take control of their finances by providing concise, well-researched and well-documented information that breaks down complex topics into manageable bites. The Bankrate promise
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There are money-related questions. Bankrate has answers. Our experts have been helping you manage your money for more than four decades. We continually strive to provide consumers with the expert advice and tools needed to make it through life’s financial journey. Bankrate adheres to strict standards standard of conduct, so you can rest assured that our content is truthful and reliable. Our award-winning editors, reporters and editors provide honest and trustworthy information to assist you in making the right financial choices. Our content produced by our editorial team is objective, factual and uninfluenced through our sponsors. We’re honest about the ways we’re 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 are compensated for the placement of sponsored products or services, or by you clicking on certain hyperlinks on our site. This compensation could influence the manner, place and in what order products appear within listing categories in the event that they are not permitted by law. We also offer mortgage or home equity products, as well as other products for home loans. Other elements, such as our own rules for our website and whether or not a product is available in the area you reside in or is within your self-selected credit score range can also impact the way and place products are listed on this site. Although we try to offer a wide range offers, Bankrate does not include details about every financial or credit products or services. Electric cars aren’t just for car buyers. In fact, the EV market has experienced a massive growth in the last few years, with registrations increasing by 60 % through 2022, as per . At the same time electric vehicle options are expanding and currently include a wide selection of designs and pricing. also comes with many benefits for saving money. In addition to the obvious saving on the cost of gasoline, there are tax credits available to those who purchase the electric car. Depending on your home state, owning an electric vehicle can save you thousands. What is the EV tax credit? What is it? EV tax credit works as a financial incentive created by the government to let you earn money to repay in the shape 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 has expanded is to examine recent . Seven percent or less of overall light-duty sales as of the third quarter of 2022 were electric vehicles. ( ) California has the most new EV registrations as of Dec. 31, 2021, at around 39 percent. ( ) In the year of 2021, there were 16.5 million EVs on the road. ( ) Around half of Americans are considering buying or leasing an electric vehicle, up 10 percent from last year. ( ) California has the highest number of charging stations, with 14,463. followed by New York, Florida and Texas. ( ) Tesla is the most popular electric car among American consumers. ( ) Fifty-three percent of those who aren’t interested in EVs fear the inconvenience of charging their vehicles. ( ) Gen Z are the first to adopt electric vehicles, with 32 percent noting their interest in buying one in the next three years. ( ) Tesla made up 68 percent of all EV registrations during the first second quarter of 2022. ( ) fifty-nine percent of people are likely to buy an EV ( ).
EV tax credit eligibility requirements EV tax credit is a federal incentive created in order to encourage people to purchase vehicles powered by electricity. This isn’t an actual check that you receive in the mail following an automobile purchase, but rather an amount of tax credit that can range from to $7,500 you are eligible for. This credit applies to all plug-in and electric automobiles, but exact credits are available through the U.S. Department of Energy’s website . What is the criteria for qualifying? Depending on the age of your vehicle, to qualify for available incentives your vehicle must meet certain specifications. If the vehicle was purchased in 2022 or before: Have been purchased within the last 12 months of December 31 in 2009. Must be a new vehicle, not used. The vehicle must be purchased that is not leased. Have a weight rating of upwards of 14,000lbs. The battery must have a capacity of at least 4 kilowatt hour (kWh). The battery is designed for use in the United States. Only for personal useonly, not for resale. Use an external plug-in recharge source. If your vehicle was purchased in 2023 or after: Buy the battery for your personal useand not to resell. Use it primarily in the U.S. Have a battery capacity of at minimum seven kWh. Have a gross vehicle weight of less than 14000lbs. Be made by a . Undergo final assembly in North America. MSRP below $80,000 for vans, sport utility vehicles and pickup trucks, and $55,000 for all other vehicles. If your used vehicle was purchased in 2023 or later: Be an individual who purchased the vehicle to use it and not to resell. You must not be the original owner. Not be claimed as a dependent on another person’s tax return. Not claimed another credit for a clean vehicle in the three years prior to the date of purchase. Have a sale price of $25,000 or less. Model year must be that is at least two years older than that of the calendar at the time you buy it. For instance, a car that you purchase in 2023 must have an model year of 2021 or older. Not have already been transferred prior to the 16th of August, 2022, to a qualified buyer. 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 inside the United States. Be bought from an authorized dealer. Bankrate tip
To find where your vehicle was assembled, enter the VIN (vehicle identification number) on the website of’s. It is also crucial to remember that purchasing the vehicle on its own will not guarantee you’ll get your tax credits. It is necessary to file a tax return an application with IRS.
Income and the EV tax credit Any motorist who submits the necessary information to qualify a vehicle on Form 8936 might be eligible for the EV tax credits. The amount of money you make can affect what tax credits you get. If you make an amount in excess of 300,000 for couples who file together or $225,000 for heads of household and $150,000 for other taxpayers, you do not be eligible for tax credits. State and local EV tax credits and incentives There are many states that do not provides EV tax credits and incentives. In fact, over half the states do not offer an EV tax credits program. Before you head out to purchase an electric charging station in your garage, think about how much you can save in the state you live in. EV tax credits by vehicle brand Here are some particular EV tax credits provided by various vehicle brands. Like every state has its own unique tax system in its tax incentives, you should consider the advantages of one vehicle brand to the other. The brand name of your vehicle
Available credit
Information collected from
Audi
From $4,502 to $7,500
BMW
Between $3,793 and $7,500
Chevrolet
No longer eligible
Fiat/Chrysler
$7,500
Ford
$4,007 to $7,500
Honda
Between $3,626 and $7,500
Hyundai
$4,543 to $7,500
Jaguar/Land Rover
From $6,295 to $7,500
Kia
$4,543 to $7,500
Mercedes
Between $3,501 and $7,500
Mitsubishi
Between $5,836 and $7,500
Nissan
$7,500
Porsche
From $3,667 to $7500
Subaru
From $4,502 to $7,500
Tesla
No longer eligible
Toyota
From $2,500 to $7,500
Volkswagen
$7,500
Volvo
$4,585 to $7,500
Making the choice to purchase an electric vehicle is similar to purchasing a gas-powered vehicle, deciding to dive into the world of buying an electric car involves weighing a variety of factors like cost, size and practicality. However, buying an EV needs extra consideration. Here are a few questions to think about before you decide whether to buy an electric vehicle is the right choice for you. Are there charging stations in my area? Before deciding to purchase an EV it is crucial to confirm that there are charging stations in your area. Make use of resources like those provided through to research options prior to purchasing. What’s the car’s range? You will need to confirm that your new vehicle’s range fits your typical driving routine as well as any other trips you’re thinking of. What is the expected maintenance schedule for your vehicle? While you will need to set aside 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 price of EV insurance ranges so best to do some research and figure out which lender is the best fit for your needs. Find Bankrate’s advice on . Do I need to lease an electric vehicle? Think about if you’re capable of obtaining 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 Tax credits for electric vehicles are one of the most expensive cars on the market, and until there are more produced in the near future, they’ll remain at a steeper price point. However, as manufacturers are making green cars prioritizing green vehicles while the state is looking to encourage that by offering tax credits, this tax credit won’t be disappearing in the near future. If you’ve been thinking about 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 the executive order stating that half of all new vehicles sold within the U.S. should be electric in 2030. While this is a steep percentage jump from the present, you might be able to make the most of the present surge in electric vehicles and save extra money through the tax credit available. 2022 Inflation Reduction Act Following months of debate the 755-page Inflation Reduction Act passed and was signed into law by Vice President Biden on Aug. 16. It is designed to “fight inflation and to invest in manufacturing and energy production, and cut carbon emissions by around 40 percent by 2030,” according to a . The new law will affect tens of millions of Americans and could encourage more drivers to buy electric and reduce carbon emissions. The legislation on clean vehicles indicates that the same $7,500 tax credit will be available to buyers who buy an EV, but more strict requirements on the car’s components could make finding a suitable EV difficult. The tax credit can be split in two parts. For a vehicle to qualify for the first $3,750 and a specific proportion of the minerals that are utilized in its battery have to be mined in the U.S. or a country that it is U.S. shares a free trade agreement. The second half of the $7,500 involves where the battery components come from. The majority of battery components have to be produced in either the U.S., Canada or Mexico. The percentages required of crucial minerals will be increasing every year between 2024 and 2026 and then until 2028 for components. Additionally, the vehicles must be built within North America. Although this poses a challenge, many manufacturers that no longer offer incentives, like Tesla and GM will be able to restart. The legislation removes the limit on the amount of EVs sold. In the past, companies that sold 200 vehicles could no longer be eligible to offer credit. Tax credits for used EV tax credits Another major shift that this law has brought about pertains to the use of EV tax credit. Drivers who aren’t in a position to buy a brand new EV are still eligible for the tax credit. When costing up to $25,000, drivers can receive a tax credit that is up to 30 percent of the purchase price, with a $4,000 cap. Liz Najman, leader of policy research at , explained how the new law affects car buyers. “Many car buyers within the U.S. can now receive up to $4,000 back on used electric vehicles with a purchase price below the $25,000 threshold,” explains Najman. More than that, an analysis by the agency that conducts the analysis found that “almost 20% of used EVs are priced at a level that is eligible and that portion that is eligible for tax credits expected to grow this year,” says Najman. “An encouraging early indicator,” says Najman, is that “already in January, approximately 50% of the used vehicles tested by our agency would be eligible for some money in return.” So while it might appear that tax credits are limited in availability following the new legislation, says Najman, “in reality, the inclusion of used car tax credits is already expanding its coverage and the number of those who are able to purchase and drive an EV.” When will the new law take force?
New used vehicle incentive rules will be applicable to vehicles purchased after Dec. 31st, 2022. These regulations will expire the following year at the end of December. 31 2023.
The bottom line If the time to buy a new set of wheels is upon you, consider buying a electric vehicle to help address climate change . Additionally, you can take advantage of tax credits for electric vehicles and incentives. Before making a decision on an EV make sure you do your research and determine if there are tax credits available. It’s also important to look into the charging stations available in your region and, depending on how you intend to utilize the vehicle, check the battery range of the EV you’re interested in. When it comes time to search for and examine rates and different prices for purchasing EVs over conventional. Questions about tax credits for electric vehicles Do leased vehicles qualify to receive an EV tax credit? Tax credit for federal residents does not apply to these . Instead, the money will go to the lessor. However, this can still reduce the monthly payments in the event that the leaser chooses to factor that incentive into your lease agreement. You can mention this in order to try saving money.Certain states offer incentives that are applicable regardless of whether you’re leasing or purchasing. Will this federal EV tax credit be around? The credit will likely remain in place for a long time, particularly due to the increased demand for climate-conscious vehicles. However, the vehicles available are constantly shifting due to the phase-out system of tax credits.When a particular manufacturer reaches the 200,000 electric vehicles that are sold to be used within the United States, those vehicles cannot be qualified for tax credits. Because of this rule, it’s crucial to verify whether the car you plan to buy is still eligible for credit. Does a family receive multiple EV credit tax deductions? In the event that two household members purchase electric vehicles for themselves, they can separately apply for the tax credit on the cars they own. If the two buy an EV together the credit 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 with the details of borrowing money to purchase an automobile. Edited by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate since the end of 2021. They are dedicated to helping their readers gain the confidence to take control of their finances with concise, well-researched and well-organized facts that break down complex topics into manageable bites.
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