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 smarter financial decisions by offering interactive financial calculators and tools that provide objective and unique content, by enabling users to conduct research and compare data without cost, so that you can make financial decisions without trepidation. Bankrate has partnerships with issuers, including but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. How We Earn Money The offers that appear on this site come from companies that pay us. This compensation could affect how and where products appear on the site, such as for instance, the order in which they may appear in the listing categories in the event that they are not permitted by law. This applies to our loan products, such as mortgages and home equity and other home lending products. This compensation, however, does have no impact on the information we provide, or the reviews that you see on this site. We do not include the vast array of companies or financial offerings that might be open to you. mseidelch/Getty Images
9 min read published 23rd January 2023
Writer: Rebecca Betterton Written by Auto Loans Reporter Rebecca Betterton is the auto loans reporter for Bankrate. She is a specialist in helping readers in navigating the ways and pitfalls of taking out loans to purchase a car. Edited 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 the confidence to control their finances by providing concise, well-researched and well-documented facts that break down complex topics into manageable bites. The Bankrate guarantee
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If you have questions about money. Bankrate has the answers. Our experts have been helping you manage your money for more than four years. We strive to continuously give our customers the right advice and tools required to make it through life’s financial journey. Bankrate adheres to a strict code of conduct policy, which means you can be confident that our content is honest and precise. Our award-winning editors and reporters create honest and accurate 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 capable of bringing high-quality information, competitive rates and useful tools for you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated for placement of sponsored products or services, or through you clicking specific links on our website. So, this compensation can affect the way, location and when products appear within listing categories, except where prohibited by law for our mortgage home equity, mortgage and other home loan products. Other factors, like our own rules for our website and whether or not a product is available within your area or at your personal credit score can also impact how and where products appear on this website. While we strive to provide a wide range offers, Bankrate does not include the details of every credit or financial item or product. Driving electric is no longer just for car buyers. It is now a reality for all types of people. EV market has experienced dramatic growth over the past few years, and registrations have increased to 60 percent by 2022, according to . At the same time the options for electric vehicles continue to diversify and now come in a range of styles, and prices. also comes with many money-saving perks. In addition to the obvious savings on gasoline, there are also tax credits available to people who buy the electric car. It is contingent on your state of residence, owning an electric vehicle can help you save thousands. What exactly is what is the EV tax credit? The EV tax credit can be described as a financial incentive created by the government to allow you to earn cash from the back of a credit, up to $7,500, if you purchase an eligible electric vehicle. Statistics on electric cars The simplest method of determining how the market has grown is to examine recent . About 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 Dec. 31, 2021, with approximately 39 percent. ( ) At the end of 2021, there were 16.5 million EVs driving around. ( ) Around 50% of Americans are considering buying or leasing an EV increasing by 10 percent from last year. ( ) California has the highest number of charging stations, with 14,463. which is followed by New York, Florida and Texas. ( ) Tesla is the most popular electric vehicle among American consumers. ( ) 53 percent of drivers uninterested in EVs worry of 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 next three years. ( ) Tesla made up the majority of EV registrations during the first half of 2022. ( ) Five-thirty-nine percent people are likely to buy an electric vehicle ( ).
EV tax credit eligibility requirements EV tax credit was a Federal incentive built to encourage drivers to purchase an electric vehicle. This incentive is not an actual check that you receive after the purchase of a car and is instead an amount of tax credit that can range from to $7500 that you will be eligible for. This tax credit is applicable to all plug-in or electric vehicles, but specific credit amounts are available on the U.S. Department of Energy’s website . What is the criteria for qualifying? Depending on the year of manufacture of your car in order to be eligible for the incentives your vehicle must meet certain specifications. If you purchased your car in 2022 or prior to the date of purchase, it must be purchased on or within the last 12 months of December 31, 2009. It must be a brand new vehicle that is not being used. Must be a purchased vehicle, not lease. It must weigh upwards of 14,000lbs. The battery must have a capacity of at least 4 Kilowatt per hour (kWh). It is intended for use exclusively in the United States. To be used for your personal use, not for resale. Make use of an external recharge source. If the vehicle you purchased was bought in 2023 or after: Purchase the battery for your personal use, not for resale. Make use of it mostly within the U.S. You must have a battery capacity of at least seven kWh. Have a gross vehicle weight rating of less than 14000lbs. It must be made by an . Undergo final assembly at North America. MSRP less than $80,000 for vans as well as sport utility vehicles and pickup trucks, and $55,000 for other types of vehicles. If the vehicle you are using was bought in 2023 or later You must be an individual who bought the vehicle for use and not to resell. You must not be the original owner. It is not possible to claim as a dependent on another person’s tax return. Have not claimed a used credit for a clean vehicle in the 3 years before the purchase date. You must have a purchase price of $25,000 or less. Model year must be at least 2 years earlier than that of the calendar in which you purchase it. For instance, a vehicle bought in 2023 will require a model year of 2021 or older. It must not have been transferred prior to august 16, 2022, to a qualified buyer. Be a vehicle with a gross weight rating that is under 14,000 pounds. 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 in the United States. It can be purchased by an authorized dealer. Bankrate tip
To locate where your vehicle was built, type in the VIN (vehicle identification number) on the website of’s. It is also important to remember that purchasing the car on its own does not guarantee you’ll get the tax credit. You must file an application with IRS.
Taxes on income and the EV tax credit Any driver who submits the required information for a qualified vehicle by using Form 8936 might be eligible for an electric vehicle tax credit. The amount of money your earn will affect the tax credits you get. If you make some amount that is greater than $300,000 for married couples filing jointly and $225,000 for heads of households and $150,000 for other taxpayers, you do not qualify in tax-credits. Local and state EV tax incentives and tax credits Unfortunately, not every state provides EV tax incentives and tax credits. In fact, more than half of states do not offer any EV tax incentive program. Before you head out to buy an electric charging station in your garage, think about the amount you could save in the state you live in. EV tax credits by vehicle manufacturer Here are some of the special EV tax credits provided by various vehicle brands. Just as each state differs in its tax incentives, you should consider the advantages of one brand of vehicle versus the other. Vehicle brand
Available credit
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
From $3,626 to $7500
Hyundai
Between $4,543 and $7,500
Jaguar/Land Rover
From $6,295 to $7,500
Kia
Between $4,543 and $7,500
Mercedes
$3,501 to $7,500
Mitsubishi
Between $5,836 and $7,500
Nissan
$7,500
Porsche
From $3,667 to $7500
Subaru
Between $4,502 and $7,500
Tesla
No longer eligible
Toyota
$2,500 to $7,500
Volkswagen
$7,500
Volvo
$4,585 to $7,500
The decision to purchase an electric vehicle is similar to buying a traditional gas car making the decision to enter the world of buying an electric car involves weighing a variety of factors like the cost, size and utility. However, buying an EV requires extra thought. Here are some questions you should think about before you decide whether to buy you want to purchase an electric vehicle is the right choice for you. Are there charging stations in my area? Before you decide to purchase an EV it is crucial to verify that there are available charging stations within your vicinity. Utilize resources such as those available through to explore options before purchasing. What is the vehicle range? You will need to confirm that the range of your new car corresponds to your usual driving routine — and any trips you’re planning. What’s the anticipated maintenance of your vehicle? While you will need to save some money for service checks but you don’t need to fret about the cost of oil replacement or other equipment for emissions. What is the cost of EV insurance? The price of EV insurance varies, so it is best to investigate and find out which lender fits best with your requirements. Check out Bankrate’s guide to . Should I lease an EV? Consider if you are in a position to get favorable incentives from manufacturers or you prefer to change your vehicle every few years. Do I need to buy a new car or used? Consider incentives available and your budget. The future of EV credit tax incentives Electric cars are one of the most expensive vehicles on the market, and until there are more produced and sold, they’ll likely remain at a more expensive price. But because manufacturers are making green vehicles an important priority, as well as the federal government 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 thinking about going green for a while, now might be the perfect time to take action. This is especially true following President Biden’s executive order stating that half of all new cars sold within the U.S. should be electric by 2030. Although that’s an impressive percentage increase from the present, you might benefit of the present surge in electric cars 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 by President Biden on Aug. 16. The legislation aims to “fight inflation, invest in domestic manufacturing and energy production, and reduce carbon emissions by 40 percent by 2030,” according to a . The new legislation will likely be affecting tens of millions of Americans and will encourage more motorists to buy electric and reduce carbon emissions. The part of the legislation concerning clean vehicles states that the same tax credit will be available to those who purchase an EV however, stricter requirements regarding the vehicle components may make locating a qualified EV difficult. The incentive can essentially be split in two parts. For a vehicle to qualify for the initial $3,750 amount, a certain percentage of critical minerals that are used in the battery must be extracted from the U.S. or a country with which there is a U.S. shares a free trade agreement. The second part of $7,500 focuses on the country where the components of the battery come from. Most components for batteries must be manufactured from either the U.S., Canada or Mexico. The minimum percentage of critical minerals will increase every year between 2024 and 2026, and until 2028 for all components. Additionally, the vehicles must be built in North America. Although this poses a challenge for some companies that do not are offering incentives, like Tesla and GM will be able to return. The law removes the restriction on the number of EVs sold. Previously, manufacturers that sold 200,000 vehicles would no longer be eligible for credits. Credits for used EV tax credits Another significant shift following this legislation concerns the use of EV credits for tax purposes. Drivers who might not be in a position to buy a brand new EV may still be eligible for credits for tax. If the vehicle costs up to $25,000, buyers are eligible for 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 , outlined how the new legislation will impact car buyers. “Many car buyers across America are now eligible for rebates. U.S. can now receive up to $4,000 back for a used vehicle with a purchase price below $25,000.” says Najman. More than that, recent analysis from the agency’s report found that “almost 20 percent of used EVs have a price which is eligible and that portion in the marketplace is expected to grow in the coming calendar year” states Najman. “An optimistic early indicator,” says Najman, is that “already in January, about 50% of used cars that were inspected by us would get the money back.” While it might appear like tax credits have a limited availability following the new legislation, says Najman, “in reality, the inclusion of used cars in tax credits has already expanded its reach and the breadth of drivers who are able to purchase and drive an electric vehicle.” What time will the new legislation go into force?
Updated used vehicle incentive regulations are applicable to vehicles bought after December. 31st, 2022 and expire the following year at the end of December. 31 2023.
The main point is that if you are considering buying a new set of wheels is near look into purchasing an electric vehicle in order to tackle the effects of climate change. You can also benefit from EV tax credits 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 important to look into the availability of charging stations in your local area. Also, depending on how you’ll use the vehicle, verify the battery range of the model you’re interested in. It’s time to evaluate rates and costs for buying EV over conventional. Questions about tax credits for electric vehicles Are leased cars eligible to receive tax credits for electric vehicles? Federal tax credits will not apply to leased vehicles . Instead, the funds goes to the lender. This can, however, lower a monthly payment in the event that the leaser decides to include the incentive into your lease contract. Mention this during to try saving money.Certain states offer incentives that are available regardless of whether you’re leasing or purchasing. Will you see the Federal EV tax credit remain available? The credit is likely to remain for the foreseeable future, particularly due to the increased demand for climate-conscious vehicles. But the available vehicles are constantly shifting due to the phase-out system of tax credits.When a particular manufacturer reaches 200 electric vehicles manufactured to be used in the United States, those vehicles cannot be qualified for tax credits. Because of this rule, it’s crucial to verify if the vehicle you intend to purchase is still available to be financed. Does a family get several EV credit tax deductions? In the event that two household members buy electric automobiles for themselves each, they are able to claim the credit for their individual cars. If two people purchase an EV together, the credit may only be claimed once.
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This article is 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 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 passionate about helping readers feel confident to manage their finances through providing clear, well-researched information that breaks down complicated topics into digestible pieces.
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