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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 choices by offering interactive financial calculators and tools that provide objective and unique content. This allows you to conduct research and compare information at no cost - so you can make your financial decisions with confidence. Bankrate has agreements 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 website are provided by companies that pay us. This compensation could affect how and where products appear on this website, for example such things as the order in which they may appear within the listing categories, except where prohibited by law. Our mortgage, home equity and other home lending products. But this compensation does have no impact on the content we publish or the reviews that you see on this site. We do not cover the vast array of companies or financial offers that may be open 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 is a specialist in helping readers with the details of taking out loans to purchase cars. The article was edited by Rhys Subitch Edited by Auto loans editor Rhys has been writing and editing for Bankrate since late 2021. They are dedicated to helping readers gain the confidence to manage their finances with clear, well-researched information that breaks down otherwise complicated subjects into digestible pieces. The Bankrate promises
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There are money-related questions. Bankrate has the answers. Our experts have helped you understand your money for more than four years. We continually strive to provide consumers with the expert guidance and the tools necessary to make it through life's financial journey. Bankrate adheres to strict standards , so you can trust that our information is trustworthy and precise. Our award-winning editors, reporters and editors create honest and accurate information to assist you in making the right financial choices. The content we create by our editorial staff is objective, truthful and is not influenced from our advertising. We're honest about the ways we're in a position to provide quality content, competitive rates and helpful tools to you , by describing how we earn money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for the placement of sponsored products or services, or through you clicking specific links on our site. This compensation could impact how, where and in what order products appear in listing categories, except where prohibited by law. We also offer mortgage or home equity products, as well as other products for home loans. Other factors, like our own proprietary website rules and whether a product is available within your area or at your own personal credit score may also influence how and where products appear on this website. We strive to provide a wide range offers, Bankrate does not include the details of each credit or financial item or product. Electric vehicles are no longer exclusive to car owners. The EV market has experienced a massive growth in the last few years, with registrations growing by 60 % through 2022, as per . In the meantime the options for electric vehicles continue to expand and come in a range of designs and prices. Additionally, electric vehicles come with numerous savings benefits. In addition to the obvious cutting down on gas , there are electric car tax credits for people who buy vehicles powered by electricity. Depending on your home state the electric car you own can help you save thousands. What exactly is the EV tax credits? What is it? EV tax credit can be described as a financial incentive provided by the federal government to allow you to earn cash from the back credits, up to $7,500, if you buy an electric vehicle that is qualified. Statistics on Electric Cars The easiest method of determining how the market is growing is to look at recent . About 7 percent of overall light-duty sales as of 30th of March 2022 comprised electric vehicles. ( ) California has the highest percentage of new EV registrations on the end of December 2021, with around 39 percent. ( ) In the year of 2021, there were 16.5 million electric vehicles on the road. ( ) Around half of Americans are interested in purchasing or leasing an EV which is up by 10 percent over 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 vehicle among American consumers. ( ) 53 percent of those who aren't interested in EVs are concerned about the hassle that comes with vehicle charging. ( ) Gen Z are the first users of electric vehicles, with 32 percent noting their desire to buy one in the coming three years. ( ) Tesla made up the majority of EV registrations in the first part of 2022. ( ) fifty-nine percent of people are likely to purchase an EV ( ).
EV tax credit requirements EV tax credits are a government incentive built to motivate drivers to buy the electric car. The incentive 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 tax credit is applicable to all electric and plug-in automobiles, but exact credits are available via the U.S. Department of Energy's website . How to qualify Depending on the year of manufacture of your car in order to be eligible for the incentives the vehicle has to meet certain criteria. 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 of 2009. Must be a new vehicle, not used. The vehicle must be purchased and not leased. It must weigh up to 14,000 pounds. Have a battery capacity of at minimum four Kilowatt hour (kWh). The battery is designed for use in the United States. For your own use, not for resale. Make use of an external recharge source. If the vehicle you purchased was bought in 2023 or after: Buy it solely for personal usage, not for resales. It is used primarily for use in the U.S. Have a battery capacity of at minimum seven kWh. You must have a vehicle weight rating of less than 14000 pounds. Be made by a . Finish assembly process at North America. MSRP less than $80,000 for vans as well as sport utility vehicles and pickup trucks and $55,000 for all other vehicles. If your vehicle was bought in 2023 or after the date of purchase: You must be an individual who bought the vehicle to use it and not to resell. Not be the original owner. It is not possible to claim as an dependent on someone else's tax return. Not claimed another clean vehicle credit in the last 3 years prior to the purchase date. You must have a purchase price of less than $25,000. You must have a model year that is that is at least two years older than the calendar year in which you purchase it. For instance, a vehicle bought in 2023 will require to have a model that was 2021 or more. Have not been transferred prior to august 16, 2022 to a buyer who is qualified. The vehicle must have a weight of under 14,000 pounds. Be an eligible FCV or plug-in EV that has the capacity of a battery of seven kWh or less. Be for use primarily in the United States. Be bought through an agent. Tip for Bankrate
To find where your vehicle was assembled, enter your VIN (vehicle identification number) on the website. It is also important to remember that purchasing the car on its own does not guarantee that you will receive your tax credits. It is necessary to file a tax return an application with IRS.
Taxes on income and the EV tax credit Any driver who submits the required details to qualify a vehicle on Form 8936 could be qualified for an electric vehicle tax credit. The amount of money you earn can impact the tax credits you receive. If you earn an amount that is greater than 300,000 for couples who file together or $225,000 for heads of household and $150,000 for all other taxpayers, you do not be eligible in tax-credits. Local and state EV tax incentives and tax credits However, not every state provides EV tax incentives and tax credits. In fact, over half of the states do not offer any EV tax credit program. Before you head out to buy an electric charging station in your garage, think about how much you could save in your state. EV tax credits for vehicles manufacturer Here are some of the special EV tax credits that are offered by various vehicle brands. Just as each state differs in its tax incentives, you should consider the advantages of one vehicle brand to other. The brand name of your vehicle
Credit available
Information obtained from
Audi
Between $4,502 and $7,500
BMW
From $3,793 to $7500
Chevrolet
No longer eligible
Fiat/Chrysler
$7,500
Ford
$4,007 to $7,500
Honda
Between $3,626 and $7,500
Hyundai
From $4,543 to $7,500
Jaguar/Land Rover
Between $6,295 and $7,500
Kia
Between $4,543 and $7,500
Mercedes
Between $3,501 and $7,500
Mitsubishi
Between $5,836 and $7,500
Nissan
$7,500
Porsche
$3,667 to $7,500
Subaru
Between $4,502 and $7,500
Tesla
No longer eligible
Toyota
Between $2,500 and $7,500
Volkswagen
$7,500
Volvo
From $4,585 to $7,500
Making the decision to buy an electric vehicle, just like buying a traditional gas vehicle making the decision to enter the world of electric vehicle buying will require you to consider a number of aspects, such as price, size, and practicality. However, buying an EV needs extra consideration. Here are some questions you should consider before you decide to purchase you should buy an electric vehicle is right for you. Are charging facilities available in my local area? Before you purchase an EV it is essential to verify that there are charging stations in your area. Use resources like those offered through to explore options before purchasing. What's the car's range? It is important to ensure that the new range fits your typical driving routine and any excursions you're contemplating. What's the planned vehicle maintenance? While you will need to reserve some cash to pay for checks on service, you won't have to worry about costs from oil adjustments or other emission equipment. What's the price of EV insurance? The cost of EV insurance ranges so best to do some research and figure out the lender will best suit your requirements. Check out Bankrate's guide to . Do I need to lease an electric vehicle? Consider if you are able to find beneficial manufacturer incentives or if you'd rather replace your vehicle every couple of years. Should I purchase a brand new vehicle or used? Consider incentives available and your budget. The future of EV credit tax incentives Electric cars remain one of the most expensive cars currently available. And until there are more produced, they will predictably stay at a higher cost. But because manufacturers are making eco-friendly vehicles an important priority and the government is looking to encourage that with tax credits, it is likely that the tax credit will not be vanishing in the near future. And if you have been thinking about making the switch to green for some time and are considering it now, it's an ideal time to start. This is especially true following President Biden's August 2021 executive order which stated that 50% of all new cars sold within the U.S. should be electric by 2030. While that is quite an increase of a significant percentage from where you are today, you could be able to take advantage of the current surge of electric cars and save money with the tax credit available. 2022 Inflation Reduction Act Following months of debate and debate, the 755-page Inflation Reduction Act passed and was signed into law by President Biden on Aug. 16. It is designed to "fight inflation, invest in domestic energy production and manufacturing and cut carbon emissions by 40 percent in the next decade," according to a . The new legislation will likely be affecting tens of millions of Americans and encourage more drivers to go electric, and help reduce carbon emissions. The part of the legislation regarding clean vehicles suggests that the same $7,500 tax credit is available to those who buy an EV however, stricter requirements regarding the car's components could make finding a suitable EV challenging. The incentive can essentially be split into two parts. For a vehicle to qualify for the initial $3,750 incentive and a specific amount of essential minerals used in its battery must be extracted in the U.S. or a country that the U.S. shares a free trade agreement. The second half of the $7,500 involves the location where the battery's components originate from. Most components for batteries must be made within the U.S., Canada or Mexico. The minimum percentage of critical minerals will rise every year between 2024 and 2026 and then until 2028 for components. Additionally, the vehicles must be built in North America. This poses a problem for some companies that do not longer offer incentives, like Tesla and GM are expected to return. The law eliminates the limitation on the amount of EVs sold. Manufacturers who sold more than 200,000 vehicles would not be able to offer credit. Used EV tax credits A major shift that this law has brought about is in regards to used EV credits for tax purposes. Drivers who might not be financially able to purchase a new EV can still benefit from this tax deduction. If the vehicle costs between $25,000 and $25,000, motorists are eligible for a tax credit that is up to 30 percent of the purchase price with a limit of $4,000. Liz Najman, leader of the 'Policy Research' department at, discussed how the new law 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," states Najman. In addition, a recent research from the reporting agency discovered that "almost 20 percent of used EVs are priced at a level that is eligible and that portion of the market is likely to expand this season," states Najman. "An encouraging early indicator," says Najman, is that "already in January, approximately 50% of the used vehicles checked with our would receive some money in return." So while it might appear that tax credits have limited availability following the recent legislation, says Najman, "in reality, the inclusion of used cars in tax credits is already expanding its coverage and the number of those who are able to own and operate an EV." When does the new legislation take the market?
New used vehicle incentive rules will apply to cars purchased after Dec. 31, 2022. These regulations will expire on Dec. 31 2023.
The final word If you are considering buying a new set of wheels is near 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 make sure you do your research and find out if tax credits still available. Also, look into the availability of charging stations in your region and, depending on how you'll use the vehicle, check that the battery's range is the same for the model you're interested in. It's time to find and examine rates and different costs of buying an EV instead of traditional. FAQs about EV tax credits Do vehicles leased by the owner qualify for an EV tax credit? Federal tax credits does not apply to those . Instead, the funds will go to the lessor. However, this can still lower the monthly installment in the event that the leaser decides to include the incentive into the lease agreement. Mention this during to try and save money.Certain states offer incentives that are applicable regardless of whether you are leasing or purchasing. Will you see the Federal EV tax credit remain in use? The credit is likely to remain in place for a long time, particularly due to the increased demand for climate-aware 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 200,000 electric vehicles sold for use within the United States, those vehicles are no longer qualified for tax credits. Because of this rule, it's important to check if the vehicle you intend to buy is still eligible for credit. Are families able to get more than one EV tax credits? When two people in the household purchase electric vehicles for themselves, they can separately claim the credit for their own vehicles. If two people purchase an EV together it 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 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 passionate about helping readers to control their finances through providing concise, well-researched and well-organized details that cut complicated topics into digestible pieces.
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