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 tools and financial calculators, publishing original and objective content. This allows you to conduct research and compare data for free – so that you can make 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 pay us. This compensation could affect how and where products appear on this site, including, for example, the order in which they may be listed within the categories of listing, except where prohibited by law. This applies to our mortgage, home equity, and other home lending products. However, this compensation will have no impact on the information we provide, or the reviews that you read on this site. We do not contain the entire universe of businesses or financial deals that could be available to you. mseidelch/Getty Images
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 with the ins and outs of securely borrowing money to purchase cars. 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 confidence to take control of their finances by providing clear, well-researched information that breaks down complicated subjects into digestible pieces. The Bankrate promises
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There are money-related questions. Bankrate has answers. Our experts have been helping you master your finances for more than four years. We strive to continuously give our customers the right guidance and the tools necessary to make it through life’s financial journey. Bankrate adheres to a strict code of conduct standard of conduct, so you can rest assured that our content is truthful and reliable. Our award-winning editors, reporters and editors create honest and accurate content to help you make the right financial decisions. Our content produced by our editorial staff is objective, factual, and not influenced by our advertisers. We’re open regarding how we’re in a position to provide quality content, competitive rates and useful tools to our customers by describing how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We receive compensation for placement of sponsored products and, services, or by you clicking on certain hyperlinks on our site. This compensation could affect the way, location and when products appear in 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 the product is available within the area you reside in or is within your self-selected credit score range may also influence the way and place products are listed on this website. We strive to provide the most diverse selection of products, Bankrate does not include details about every credit or financial products or services. Driving electric is no longer exclusive to car owners. The EV market has experienced a massive growth over the past few years, with registrations increasing to 60 percent by 2022, as per . At the same time the options for electric vehicles continue to expand and include a wide selection of designs, styles and price points. Also, it comes with a variety of money-saving perks. In addition to the obvious savings on gasoline, there are tax credits for buyers of vehicles powered by electricity. It is contingent on your state of residence the electric car you own can help you save thousands. What is the EV tax incentive? The EV tax credit can be described as a financial incentive built by the government that will let you earn money from the back of a credit, up to $7,500, if you purchase an electric vehicle that is qualified. Electric cars statistics The easiest way to see how much the market has grown is to take a look at the most the most recent . About 7 percent of overall light-duty sales as of the 3rd quarter in 2022 was electric vehicles. ( ) California has the largest percentage of new EV registrations on Dec. 31, 2021 at around 39 percent. ( ) In the year of 2021, there would be 16.5 million EVs on the road. ( ) Nearly 50% of Americans are interested in purchasing or leasing an electric vehicle which is up by 10 percent over the previous 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 consumers. ( ) 53 percent of people who are not interested in EVs worry of the inconvenience that comes with vehicle charging. ( ) Gen Z are the first to adopt electric vehicles and 32 percent have indicated 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. ( ) fifty-nine percent of people are likely to buy an EV ( ).
EV tax credit eligibility requirements EV tax credit was a Federal incentive designed in order to encourage people to purchase the electric car. The incentive isn’t an actual check that you receive in the mail following the purchase of a car and is instead a tax credit worth up to $7500 that you will be eligible for. The credit is available to all plug-in and electric vehicles, but specific 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 in order to be eligible for the incentives your vehicle has to meet certain criteria. If your vehicle was purchased in 2022 or before it was purchased on or after December 31 in 2009. Must be a new vehicle that is not being used. It must be a new vehicle, not leasing. It must weigh up to 14,000 pounds. Have a battery capacity of at least four kilowatt per hour (kWh). The battery is designed for use for use in the United States. Only for personal usage, not to be sold. Use an external plug-in recharge source. If the vehicle you purchased was purchased in 2023 of after: Purchase the battery for your personal use, not for resale. Use it primarily in the U.S. You must have a battery capacity of at least seven kWh. You must have a vehicle weight of less than 14000 pounds. The vehicle must be manufactured by a . Undergo final assembly at North America. MSRPs below $80,000 for vans or sport utility vehicles, pickup trucks and $55,000 for other vehicles. If your vehicle was bought in 2023 or later the date of purchase: You must be an individual who bought the vehicle for use and not for resale. You must not be the original owner. It is not possible to claim as dependent on another’s tax return. Not have claimed another used clean vehicle credit in the three years prior to the purchase date. You must have a purchase price of less than $25,000. Model year must be that is at least two years older that the year when you purchase it. For example, a vehicle that you purchase in 2023 must have to have a model that was 2021 or more. Have not been transferred between August 16, 2022, to a qualified buyer. The vehicle must have a weight rating that is under 14,000 pounds. You must be a FCV-compliant plug-in EV that has a battery capacity of seven kWh or less. Be for use primarily in the United States. It can be purchased through an authorized dealer. Tip for Bankrate
To find where your vehicle was built, type in your VIN (vehicle identification number) on the website. It is also important to note that purchasing the vehicle alone does not guarantee you’ll get the tax credit. You have to file an application with IRS.
The tax credit for income and the EV credit Any motorist who submits the necessary information for a qualifying vehicle using Form 8936 might be qualified for an EV tax credit. The amount of money you earn can impact the tax credits you receive. If you make some amount in excess of 300,000 for couples who file jointly or the heads of households and $150,000 for other taxpayers, you won’t qualify to receive tax credit. State and local EV incentives and tax credits Unfortunately, not every state provides EV incentives and tax credits. In fact, more than half of states in the country do not 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 the state you live in. EV tax credits by vehicle manufacturer Here are some of the specific EV tax credits offered by vehicle brands. Like every state has its own unique tax system in its tax incentives, you should consider the advantages of one vehicle brand compared to the other. The brand name of your vehicle
Credit available
Information obtained from
Audi
$4,502 to $7,500
BMW
$3,793 to $7,500
Chevrolet
No longer eligible
Fiat/Chrysler
$7,500
Ford
$4,007 to $7,500
Honda
$3,626 to $7,500
Hyundai
Between $4,543 and $7,500
Jaguar/Land Rover
$6,295 to $7,500
Kia
From $4,543 to $7,500
Mercedes
From $3,501 to $7,500
Mitsubishi
$5,836 to $7500
Nissan
$7,500
Porsche
From $3,667 to $7500
Subaru
Between $4,502 and $7,500
Tesla
No longer eligible
Toyota
Between $2,500 and $7,500
Volkswagen
$7,500
Volvo
$4,585 to $7,500
Making the choice to purchase an EV Just as with purchasing a gas-powered vehicle and deciding to venture into the world of buying an electric vehicle will require you to consider a number of aspects, like cost, size and practicality. But buying an EV needs extra consideration. Here are some questions you should think about before you decide whether to buy an electric vehicle. Are there charging stations in my local area? Before you purchase an EV it is crucial to ensure that there are available charging stations in your region. Make use of resources like those provided through to explore options before purchasing. What’s the range of your vehicle? You’ll need to verify that your new vehicle’s range is compatible with your normal driving habits and any excursions you’re planning. What’s the planned maintenance of your vehicle? Although you’ll need to reserve some cash to pay for checks on service however, you will not have to worry about costs from oil adjustments or other emission equipment. What is the cost of EV insurance? The cost of EV insurance varies, so it is best to investigate and find out the lender will best suit your requirements. Check out Bankrate’s guide to . Do I need to lease an electric vehicle? Think about if you’re capable of obtaining beneficial manufacturer incentives or if you prefer to change your car every couple of years. Do I need to buy a new car or used? Weigh available incentives and your budget. The future of EV Tax credits for electric vehicles are still one of the most expensive vehicles currently available. And until more are produced in the near future, they’ll remain at a more expensive price. However, as manufacturers are making eco-friendly vehicles prioritizing green vehicles, while the state is trying to reward them, the tax credit likely won’t be disappearing anytime soon. If you’ve been interested in becoming more environmentally friendly for a while, now might be a good time to act. 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 in 2030. While this is an increase of a significant percentage from where you are today, you could benefit of the current surge of electric vehicles and also save some money by taking advantage of an available tax credit. 2022 Inflation Reduction Act Following months of debate the 755-page Inflation Reduction Act passed and was adopted by 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 law will be affecting tens of millions of Americans and will encourage more motorists to buy electric and reduce carbon emissions. The legislation on clean vehicles indicates that the same $7,500 tax credit is available to those who buy an EV however more stringent requirements for the components of the vehicle could make locating a qualified EV difficult. The incentive is divided into two parts. In order for a car to be eligible for the first $3,750, a certain percentage of critical minerals that are used in the battery must be extracted in the U.S. or a country that it is U.S. shares a free trade agreement. The second half of the $7,500 is about the location where the battery’s components originate from. Most components for batteries must be produced within Canada, the U.S., Canada or Mexico. The percentages required of crucial minerals will rise each year from 2024 to 2026, and until 2028 for components. Furthermore, the cars must be built within North America. This poses a problem, many manufacturers that no provide incentives, such as Tesla and GM, will be able to return. The law removes the restriction on the amount of EVs sold. In the past, companies that sold 200,000 vehicles would no longer be eligible for credit. Used EV tax credits Another major shift that this law has brought about is in regards to used EV tax credit. Drivers who might not be financially able to purchase a new EV can still benefit from this tax deduction. For purchases up to $25,000, buyers can receive a tax credit of up to 30 percent of the cost of purchase, with a maximum of $4,000. Liz Najman, leader of the ‘Policy Research’ department at, discussed how the new law will impact car buyers. “Many car buyers in the U.S. can now receive up to $4,000 in rebates for a used vehicle that has a price less than $25,000.” says Najman. Additionally, a an analysis by the agency that conducts the analysis discovered that “almost 20% of used EVs are priced at a level that would be eligible, and that segment that is eligible for tax credits predicted to increase in the coming calendar year” Najman says. Najman. “An optimistic early indicator,” says Najman, is that “already in January, about 50% of cars checked with our would receive the money in return.” This means that while it might appear like tax credits have a limited availability due to the recent legislation, says Najman, “in reality, the inclusion of used cars in tax credits is already expanding their 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 will apply to cars purchased after Dec. 31st, 2022. They will expire the following year at the end of December. 31 2023.
The bottom line If the time to purchase new wheels is upon you think about buying an electric vehicle in order to tackle climate change . Additionally, you can take advantage of tax credits for electric vehicles and incentives. Before deciding on a particular EV be sure to do your homework and determine if there are tax credits available. It’s also essential to investigate the availability of charging stations in your area and in relation to how you intend to utilize the vehicle, confirm the battery capacity of the EV you’re interested in. It’s time to examine rates and different prices for purchasing EVs instead of traditional. Questions about tax credits for electric vehicles Are leased cars eligible to receive tax credits for electric vehicles? Tax credit for federal residents will not apply to leased vehicles . Instead, that money will go to the lessor. This can, however, lower the monthly installment in the event that the lessor chooses to factor that incentive into the lease agreement. You can mention this in order to try and save money.Certain states have incentives that are applicable regardless of whether you are leasing or purchasing. Will this federal EV tax credit remain available? It is likely that the credit will remain for the foreseeable future, particularly with increased pushes for more climate-aware vehicles. However, the vehicles available are always changing due to the phase-out system of tax credits.When an individual manufacturer has reached the 200,000 electric vehicles that are sold to be used throughout the United States, those vehicles are no longer 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 be eligible for more than one EV credit tax deductions? If two members of the same household purchase electric vehicles for themselves each, they are able to claim credit for the cars they own. If two people purchase an EV jointly 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 is a specialist in helping readers to navigate the ins and outs of securely borrowing money to buy an automobile. Written by Rhys Subitch Edited by Auto loans editor Rhys has been editing and writing for Bankrate from late 2021. They are dedicated to helping their readers feel confident to control their finances through providing precise, well-studied facts that break down complex topics into manageable bites.
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