Electric vehicles cost more than gasoline-powered vehicles of comparable size. Tax credits and other benefits reduce the price difference and encourage car buyers to consider cleaner electric vehicles and plug-in hybrids.
Knowing how much money you are receiving from the federal government and certain states when you buy an electrified vehicle helps you make an informed decision. Our EV tax credit calculator can help you understand the benefits.
See how much you could get back by purchasing a new electric or plug-in hybrid vehicle.
Federal electric vehicle tax credits of $ 2,500 to $ 7,500 are available for new electric vehicles and plug-in hybrids, but not for hybrids. The credit applies to the year you buy the vehicle and your tax credit is capped at the amount you owe in the year you buy the car. If you lease, the credit goes to the title holder of the car, and some or most of the credit is used to reduce the monthly payments. Only the first buyer gets the credit.
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Tax credits explained
When you buy an electrified vehicle (battery electric vehicle (BEV) or plug-in hybrid electric vehicle (PHEV)), most people are eligible for a federal tax credit of $ 2,500 to $ 7,500. In addition, some 20 states offer credits or discounts as well as intangible benefits such as free recharging, free municipal poking, lower highway tolls, or single occupant access to freeway lanes for multiple occupant vehicles (HOVs).
There are exceptions, explained in the FAQ below. You must buy a vehicle, not lease it, although there are ways to collect while leasing, you must be the very first person to purchase (title and register) the vehicle and, by current rules, General Motors vehicles and Toyota / Lexus are not covered because they have exceeded the current limit of 200,000 vehicles eligible for rebates.
Since these are tax credits, you have to pay as much tax — that is, your total taxes for the year, not the rest you may owe on April 15 — as you pay. you will get tax credits. It might seem unfair, but if you can afford an EV of $ 50,000 and have managed to have a total tax debt of less than $ 7,500, not many people will take pity on you.
The rules may change if the Biden administration’s infrastructure bill goes up with up to $ 12,500 in credits, as currently envisioned. Maximum credit requires the car to be made in the United States, cost less than $ 80,000, and be built in a union factory. The latter part may cost the administration the support of lawmakers in the new southern states which have been the site of most of the new auto factories over the past 25 years, all of which are non-union.
VE Tax Calculator FAQ
Is it a tax credit, a tax deduction or an immediate abatement? How much?
The federal program is a tax credit compared to what you owed the year you bought the vehicle. The amount is between $ 2,500 and $ 7,500, depending on the size of the battery. Each EV has a battery large enough to be good enough for a $ 7,500 credit.
My taxes are less than the credit for the EV I just bought. Can I get the balance the following year?
Nice try, but no. For individual buyers, the tax credit only offsets taxes for the calendar year in which you purchased the vehicle.
Does the tax credit apply to used vehicles? What if the first owner had never claimed the tax credit?
No, this is only for new vehicles and applies only to the first buyer. But the selling price used should reflect, more or less, that the actual purchase price was $ 7,500 less than the sticker price.
Does the EV tax credit benefit me if I rent an EV?
No, not directly. The tax credit goes to the first purchaser of the vehicle, which for rentals is typically the leasing company or its financial partner. But you should expect to recoup most, if not all, of the maximum $ 7,500 in the form of lower lease payments. On a typical 36 month lease, payments could be up to $ 208.33 lower ($ 7,500 divided by 36). Ask the sales representative or the person responsible for finance and insurance to tell you the amount applied.
Are there times when I should rent and not buy?
If you buy a car in the United States but owe less than $ 7,500 in US taxes, which is about $ 53,000 in income, you might consider leasing. The seller should use some / most of the credit at a lower monthly rate.
Do I get the credit if I buy a demo or service loan electric vehicle with virtually no mileage?
It depends. IRS rules say that to get EV credit, “the original use of the vehicle started with you. »Ask the dealer: has the car been registered / titled? On sales documents, will it be marked as new or used? If the dealership says the vehicle qualifies for the tax credit, ask for a note to that effect, just in case.
How is the tax credit calculated?
Do you really want to know? As long as the battery is greater than 4 kilowatt hours (kWh), which excludes hybrids, you are entitled to $ 417 for any battery pack, plus $ 2,500 for a minimum block of 5 kWh, plus $ 417 per kilowatt hour at- above 5 kWh (calculate the size of the battery to the tenth of a kilowatt hour). So a 10kWh battery would get $ 2,500 plus $ 417 plus 5 times $ 417 ($ 2,085) or $ 5,002. You are entitled to full credit if the vehicle has at least a 16.0 kWh battery. Shortcut to Calculating the Tax Credit: If it’s a fully electric vehicle, the battery is still big enough to qualify for the full $ 7,500 credit.
How to claim the tax credit?
File Federal Form 8396 with your taxes.
Are electric two-wheelers covered?
Yes, if: They can reach 45 mph, are driven by an electric motor with a battery of at least 2.5 kilowatt hours, can be recharged from an external electrical source and (this can be the shot of the Fed 🙂 weigh less than £ 14,000. The credit is easy to calculate: 10% of the price, credit max $ 2,500. Electric mopeds would not be covered (not fast enough, battery less than 2 kWh). It is currently in effect until December 2021.
Can Small Businesses Get VE Credit?
Any business can benefit from the tax credit and it can be spread over more than the current tax year. Talk to your tax advisor.
Can I get tax credits for more than one EV?
Yes. But if you buy more than one EV in a tax year, your total credits are capped at your total tax payable for the year.
Is there a tax credit for hybrids?
Not in the last decade. From 2006 to the end of 2010, there was a tax credit available of up to $ 3,400. Hybrids have batteries of 1 to 2 kWh, making them too small to qualify for the current plug-in hybrid / EV credit which requires at least a 4 kWh battery.
What about state tax credits?
Some states offer credits or discounts for the purchase of electric vehicles or plug-ins. The best credits and benefits are usually found in CARB states that follow the more stringent automotive emissions standards set by the California Air Resources Board (CARB): California, Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New -Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Washington State and Washington DC About 20 states offer credits or discounts for electric vehicles and plug-ins.
Can I get credit if I install an EV charger?
Yes. A federal tax credit is available for 30% of the cost of the charger and installation, up to a credit of $ 1,000, or $ 3,000 spent. As a rule of thumb, allow $ 500 for the charger (approx) and $ 500 to $ 1000 (very approx) for installation. For a $ 500 charger and a $ 750 installation, totaling $ 1,250, you will get a federal credit of $ 375.
Are there other benefits of buying an EV?
States and municipalities may offer you access to HOV (multiple occupancy vehicle) lanes with only the driver on board, free municipal parking, free charging at select state or local sites, and rates for electricity lower at the house. It may vary by county, township or electricity supplier.
Is every EV entitled to a tax credit?
The current tax credit applies to cars from automakers who have not yet sold 200,000 EVs. So far it’s Tesla and General Motors. No other automaker is likely to hit the 200,000 unit cap for some time. And the infrastructure bill would offer a reset restoring tax credits to GM and Tesla, at least for the electric vehicles they build in the United States.