Otis Singleton
Electric vehicles (EVs) are becoming increasingly popular, and the US government is incentivizing the shift with tax credits. The federal EV tax credit is worth up to $7,500 for new electric vehicles and $4,000 for used ones. The credit is available for vehicles purchased in 2023 or after, and there are additional incentives at the state and local levels. For instance, California's Clean Air Vehicle program grants carpool lane access to select electric vehicles, and New Yorkers might be eligible for a state-level rebate of up to $2,000 on top of the federal tax credit. However, some states may not allow claiming both a state-level rebate and a federal one.
| Characteristics | Values |
|---|---|
| Tax credit for new electric vehicles | Up to $7,500 |
| Tax credit for used electric vehicles | Up to $4,000 |
| Tax credit for home chargers | Up to $1,000 |
| Tax credit for energy storage | Up to $1,000 |
| Tax credit for commercial vehicles | Up to $7,500 |
| Tax credit for vehicles meeting critical mineral requirements | $3,750 |
| Tax credit for vehicles meeting battery component requirements | $3,750 |
| Tax credit for vehicles meeting both critical mineral and battery component requirements | $7,500 |
| MSRP for vans, sport utility vehicles, and pickup trucks | Not over $80,000 |
| MSRP for other vehicles | Not over $55,000 |
| Minimum credit amount | $2,500 |
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What You'll Learn
Tax credits for new vs. used electric vehicles
Tax credits are available for both new and used electric vehicles, but the amount of credit depends on several factors, including the date of purchase, the vehicle's specifications, and the buyer's income.
Tax Credits for New Electric Vehicles
For new electric vehicles, a tax credit of up to $7,500 is available for eligible vehicles. To qualify for the full credit, the vehicle must meet certain specifications, including price caps, manufacturing guidelines, and critical mineral and battery component requirements. The vehicle's manufacturer suggested retail price (MSRP) must not exceed $80,000 for vans, sport utility vehicles, and pickup trucks. The credit amount also depends on the vehicle's battery capacity, with a minimum credit of $3,751 for vehicles with a minimum of 7 kilowatt-hours of battery capacity.
Tax Credits for Used Electric Vehicles
For used electric vehicles, a tax credit of up to $4,000 is available for eligible vehicles. To qualify, the vehicle must be a pre-owned, qualified plug-in electric vehicle (PEV) or fuel cell vehicle (FCV), including cars and light trucks. The vehicle must also meet certain specifications, including gross vehicle weight rating and battery capacity requirements. The credit is also subject to income thresholds, and buyers should ensure that the dealer is registered with the IRS Energy Credits Online program.
Additional Considerations
It is important to note that tax credits for electric vehicles are subject to change and may vary based on local and state-level incentives. For example, California's Clean Air Vehicle program grants carpool lane access to select electric vehicles, while New Yorkers may be eligible for a state-level rebate of up to $2,000 on top of the federal tax credit. Additionally, tax credits are available for the installation of home charging ports and energy storage for electric vehicles, with a credit of up to $1,000 for each charging port and each energy storage property.
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State-level rebates
- Reduced electricity rates: Tucson Electric Power, for example, offers three pricing plans for EV charging, allowing customers to reduce their energy bills by charging during off-peak hours. SRP and APS also offer reduced rates for EV owners based on time-of-use charging.
- Rebates for purchasing an EV: The Iowa Association of Electric Cooperatives (IAEC) offers rebates to residents who purchase and install a qualifying Level 2 charging station. The Orlando Utilities Commission (OUC) offers a $200 rebate for residential customers who purchase or lease a new electric vehicle. Black Hills Energy residential energy customers may qualify for up to a $5,500 rebate towards a new or used electric vehicle.
- Rebates for installing EV chargers: Cobb EMC provides a $250 incentive for eligible members who purchase and install an ENERGY STAR-certified Level 2 EV charging station. Entergy offers a $250 rebate for installing Level 2 EV chargers at home, with a $100 bonus if the customer enrolls in the time-of-use discount program. Evergy offers up to $500 towards the cost of an approved 240-volt outlet or a hardwired home charging station.
- Loans for EV purchases: Customers can become members of the ElecTel Cooperative Federal Credit Union and qualify for low-rate loans for electric vehicles.
- Exemptions from emissions testing: The Illinois Vehicle Emissions Testing Program exempts vehicles powered exclusively by electricity from state motor vehicle emissions inspections.
- Reduced vehicle registration fees: Some states offer reduced vehicle registration fees for electric vehicles.
- Rebates for purchasing and installing EV chargers: Duke Energy will provide a one-time credit of up to $1,117 per charger toward the costs of preparing your home for an EV charger. Surry-Yadkin gives customers a $500 rebate when they purchase and install a home charger.
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Vehicle eligibility
For a new, qualified plug-in electric vehicle (EV) or fuel cell vehicle (FCV), you may qualify for a clean vehicle tax credit of up to $7,500. This credit is available for vehicles purchased in 2023 or after, and the seller must provide information about the vehicle's qualifications at the time of sale. The vehicle's manufacturer suggested retail price (MSRP) must not exceed $80,000 for vans, sport utility vehicles, and pickup trucks. To claim the credit, you must file Form 8936, Clean Vehicle Credits, with your tax return and provide your vehicle's VIN.
For used electric vehicles, you may be eligible for a tax credit of up to $4,000, limited to 30% of the car's purchase price. The vehicle must be plug-in electric or fuel cell with at least 7 kilowatt-hours of battery capacity. Additionally, to be eligible for the battery portion of the credit (up to $3,750), a certain percentage of the vehicle's battery must be assembled or manufactured within North America.
There are also tax credits available for installing electric vehicle chargers and associated energy storage in your home, which can provide a credit of up to $1,000 for each charging port and energy storage property.
It is important to note that the eligibility criteria and credit amounts may change over time, so it is recommended to refer to the FuelEconomy.gov website for the most up-to-date information on eligible models and requirements.
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Dealership vs. tax return claims
As of 2024, taxpayers purchasing a new electric vehicle (EV) or fuel cell vehicle (FCV) can choose to transfer the tax credit to an eligible dealership instead of claiming it on their tax returns the following year. This allows the dealer to lower the cost of the vehicle by the corresponding credit amount for an immediate point-of-sale discount. The dealership must be registered with IRS Energy Credits Online.
If you choose to claim the credit on your tax return, you will need to file Form 8936 when you file your tax return for the year in which you take delivery of the vehicle. This is true whether you transferred the credit at the time of sale or are waiting to claim it. The IRS has set a handful of requirements that a person must meet to qualify for the electric vehicle tax credit, including income, the vehicle's MSRP (price), its final assembly location, and battery components.
The tax credit for a new, qualified EV or FCV is up to $7,500. The credit for a used EV is up to $4,000. The purchase price of a used EV must be less than $25,000, and the vehicle must be at least two years old. The vehicle must also meet other IRS specifications, including manufacturing guidelines and weight restrictions.
The commercial clean vehicle credit is available to businesses and tax-exempt organisations and is less restrictive than the clean vehicle credit available to individual taxpayers. It allows businesses to claim tax breaks for a wider range of eligible electric vehicles, including those not manufactured in the US.
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Charging equipment and installation tax credits
The federal EV charger tax credit for electric vehicle charging stations and equipment is back, thanks to the Inflation Reduction Act (IRA). The tax credit is 30% of hardware and installation costs, with a maximum benefit of $1,000 per item. This applies to each charging port, fuel dispenser, or storage property. The tax credit also applies to bidirectional (two-way) chargers.
Businesses that install new EV chargers or EV charger equipment can also benefit from a tax incentive of up to 30% of the total cost of equipment and installation. However, they will have to meet certain labor and construction requirements to be eligible to claim the full incentive.
The Alternative Fuel Vehicle Refueling Property Tax Credit is available to individuals who install qualified vehicle refueling and recharging property, including electric vehicle charging equipment, at their homes. This tax credit reduces the costs associated with such charging equipment and installation. The credit is worth up to $1,000 for each item of property.
The tax credit for refueling property is also available to businesses and tax-exempt entities. Starting on January 1, 2023, the value of this credit is 6% of the cost of property subject to depreciation, with a maximum credit of $100,000 for each single item of property.
To qualify for the tax credit, the refueling or recharging property must be installed in a low-income community census tract or non-urban census tract.
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Frequently asked questions
Yes, there are still tax credits for electric vehicles.
The tax credit for a new electric vehicle is up to $7,500.
The tax credit for a used electric vehicle is up to $4,000.
To qualify for the tax credit, the electric vehicle must be purchased new and the seller must report the necessary information to the buyer and the IRS. The vehicle's manufacturer suggested retail price (MSRP) must not exceed \$80,000 for vans, sport utility vehicles, and pickup trucks, and \$55,000 for all other vehicles. The buyer's modified adjusted gross income must also be below a certain threshold.
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