Electric Vehicle Tax Credit: All You Need to Know
Electric cars produce no atmospheric emissions, so do not contribute to air pollution. They also save on the costs of fuel, but are expensive to buy. The U.S. government has created an incentive that can help you save on the initial cost. A federal electric vehicle (EV) tax credit is available to consumers who buy electric vehicles (you won’t get a tax credit by leasing one or buying a used car). Here is what you need to know about this tax credit.
What Is the Tax Credit Worth?
The federal tax credit can be anywhere from $2,500 to $7,500. There are various factors that determine how much you are eligible for. These include the size of the vehicle, battery capacity (in kilowatt-hours), and your tax status and income. Your individual tax circumstances play a large role in what you get, but the range, price, or performance of the vehicle have no bearing on the amount of the credit. Whether you purchase a Nissan Leaf or Porsche Taycan, you are eligible for the same tax credit.
How Do I Get Paid?
The federal tax credit is not a rebate. You will not receive cash or a check for the amount you qualify for. If you are eligible for a credit of $7,500, it will go towards reducing your federal tax liability. But if you owe, for example, $4,000 in income tax this year, that’s as much of a tax credit as you can get, and you can’t use the rest to reduce future tax liabilities.
How Do I Claim My EV Tax Credit?
To claim your credit, Qualified Plug-in Electric Drive Motor Vehicle Credit: Form 8936 is required. You’ll need to report the credit amount from this document on a 1040 Individual Income Tax Return form if your vehicle is for personal use. If you qualify for a tax refund, the credit can’t be applied to it, as it’s non-refundable.
When Are EV Tax Credits Good Until?
As sales increase, the government is beginning to phase out the electric vehicle tax credit. It’s expected that the costs of EV technology will come down as demand increases. Manufacturers will no longer receive government subsidies after selling 200,000 qualified vehicles. Tesla reached this milestone in July 2018 and GM did so later that year. Nissan is expected to be next.
Can the Tax Credit Be Passed on to Another Owner?
An EV tax credit can only be claimed by the original registered owner. It cannot be passed on to anyone else, even if the original owner didn’t apply for the credit. The credit won’t be available if you purchased an EV from a dealership that used it as a loaner car or demonstration model.
Do State and Local Tax Credits and Incentives Still Apply?
You can qualify for credits, incentives, and even rebates from your state or local government if you qualify for the federal EV tax credit. Your local electrical company may offer incentives and discounts as well. These can all be combined, although incentive programs vary from one state or region to another. In states where you get an instant rebate, it’s paid directly to the dealership, so you don’t have to wait until next tax season.
Other states also include discounts on sales tax, car registration, or title fees. In California, EV owners have automatic access to carpool lanes. Some states have created incentives for lower-income buyers, while others have put limits on the price of vehicles covered or implemented income caps for applicants.
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