Electric vehicles (EVs) have become a popular choice for people looking to lower their carbon footprint and reduce fuel costs. To encourage the adoption of EVs, the U.S. government offers various tax credits that increase the appeal of making the switch. If you’re wondering who qualifies for these rebates and how much savings they represent, you’re in luck. It’s time to dive into the available EV tax credits, so you can determine how much you’ll save on an electric vehicle!
Federal EV Tax Credit: What You Need to Know
The federal government offers tax credits for new electric vehicles through the Clean Vehicle Credit. This incentive was recently updated as part of the Inflation Reduction Act. The credit can provide thousands of dollar in tax relief when purchasing a new electric vehicle. 1 However, not every EV qualifies, and there are a few important factors to consider.
The amount of the credit depends on the car’s battery capacity, manufacturing location, and other key factors. For example, to qualify, the vehicle must meet certain domestic assembly and material requirements. Specifically, it needs to be assembled in North America, and a portion of the battery’s components and materials must be sourced from the U.S. or its trade partners. Additionally, only vehicles that have a manufacturer’s suggested retail price (MSRP) under certain thresholds qualify.
It’s important to note that the federal EV tax credit is non-refundable. This means you can only use the credit to reduce the amount of taxes you owe. If you owe less in taxes than the credit amount, you will not receive the difference as a refund. Make sure to consult with a tax professional to understand how this credit might impact your tax situation.
Income Requirements: Who Qualifies?
Along with the vehicle requirements, there are also income limits for qualifying for the federal EV tax credit. These income caps help ensure that the credit benefits middle-class families rather than high-income earners.
To qualify for the full credit, individual taxpayers must meet certain modified adjusted gross income (MAGI) criteria. 2 If your income exceeds these limits, you may not be eligible for the tax credit. This is another reason to check your income level and eligibility before purchasing a new electric vehicle.
Credits for Used EVs: A New Addition
One of the major updates in recent legislation is the introduction of a tax credit for used electric vehicles. Previously, only new EVs were eligible for federal incentives, but now, there is a credit available for those purchasing a pre-owned electric vehicle.
The Credit for Previously Owned Clean Vehicles allows buyers of used EVs to claim a tax credit based on a percentage of the vehicle’s cost. To qualify, the used EV must meet certain age requirements, and income limits also apply. Just like with new EVs, taxpayers need to fall within specified income brackets to benefit from this credit.
This new tax credit for used EVs makes electric vehicles more accessible to a wider range of buyers, particularly those seeking affordable options in the expanding EV market.
State-Level EV Incentives: Additional Savings
In addition to federal tax credits, many states offer their own incentives for purchasing electric vehicles. These incentives can include tax credits, rebates, or reduced registration fees. The availability and amount of state incentives vary widely, so it’s essential to check what your state offers before making a purchase.
The best way to find out what incentives your state offers is to check your state’s government website. Alternatively, you can visit the U.S. Department of Energy’s Alternative Fuels Data Center. The extra effort is often worth it, as combining state incentives with the federal tax credit can result in huge savings.
EV Charging Incentives: Powering Up at a Lower Cost
Savvy consumers already know that buying an EV also means buying home EV charging equipment. Fortunately, there are incentives available for those as well! The federal government offers a tax credit of up to 30% of the cost of purchasing and installing an EV charging station at home, with a maximum credit of $1,000. 3 Some states and local utilities also provide rebates or incentives for installing home chargers.
Needless to say, this additional credit can further take the sting out of purchasing an EV while maximizing the convenience of charging your car at home. By investing in a home charging station, you won’t have to rely on public charging networks.
Leverage Those EV Tax Credits
Transitioning to an electric vehicle can be a significant investment, but the available EV tax credits make it more affordable. By taking advantage of federal and state incentives, you can save thousands on your purchase and even on home charging equipment.
Remember to check the latest eligibility requirements and consult with a tax professional to ensure you’re maximizing your savings. With these incentives in place, now could be the perfect time to make the switch to an EV and enjoy both the environmental and financial benefits.