Luckily, the federal government wants to thank you for helping clean up our air by offering an electric car tax credit that can help you save money. The obvious price is often not the real price when it’s time to buy a battery-electric vehicle (BEV.) To encourage sales of plug-in electric vehicles, also known as electric cars or EVs, the federal government began offering a federal income tax credit in 2010 for eligible electric vehicles purchased after Dec. 31, 2009. Federal incentives for electric vehicles. The amount is determined by the power storage of the battery. So as you’re considering if going green is right for you, keep in mind that filing one form with the IRS could make a huge difference in the overall price of your car. Electric Vehicle Tax Credit: Everything You Need to Know In this article, we’ll tell you everything you need to know about the federal tax credit available for 2020. First, you must purchase, not lease the vehicle to be directly eligible for the tax credit. Yes, it is absolutely possible. It’s easy to find out if you’re eligible to file for the electric car tax rebate. The amount of electric vehicle tax credit that a taxpayer can get is limited by the amount of tax liability. This is because it is a non refundable credit. As for the acceleration and power, electric cars are on par with the gas-powered vehicles. If the vehicle is leased, only the lessor and not the lessee, is entitled to the credit. Environmental emissions programs around the world, such as the Zero Emissions Vehicle (ZEV) program in California, give out credits to automakers that produce and sell electric vehicles. The full amount of the EV qualifying tax credit is in place DURING the entire calendar quarter in which 200,000 EVs are sold by a manufacturer, AND through the subsequent quarter. To help you get a better idea of what you could save, the Office of Energy Efficiency & Renewable Energy keeps track of the federal, state, local and utility incentives that are available. What exactly does that phase-out mean for you? The federal tax credit is phased out over time beginning the second quarter AFTER the quarter in which a manufacturer reaches a total of 200,000 BEV or PHEV vehicles sold since 2010. Retrieved from: Federal Tax Credits for Electric and Plug-in Hybrid Cars. How does an electric vehicle tax credit work? Qualifying electric vehicles are eligible for a $2,500 credit, plus $417 for a rechargeable battery of up … Battery electric and plug-in hybrid vehicles purchased in or after 2010 may be eligible for the US federal income tax credit of up to $7,500. The spirit of the electric card tax credit was to get more electric cars on the road and minimize the environmental impact of fuel-emission vehicles. In addition to tax credits, you might want to take a look at just how much money you could save on fuel. The tax credit expires for each manufacturer after more than 200,000 tax credits have been claimed from cars sold by them. Generally, you need to apply for the tax credit the year you purchase the vehicle. With only one niche vehicle … This program started in 2009, when the Internal Revenue Service Code Section 30D started offering a credit for “Qualified Plug-in Electric Drive Motor Vehicles including passenger vehicles and light trucks.” Based on battery capacity, you could receive a tax credit of up to $7,500.1. The credit amount varies based on the capacity of the battery used to power the vehicle. At minimum, recipients receive $2,500 in tax credit. You may be eligible for a credit under Section 30D(a), if you purchased a car or truck with at least four wheels and a gross vehicle weight of less than 14,000 pounds that draws energy from a … Electric cars are also much less prone to breaking thus reducing maintenance costs. The deal was to offer a tax credit to the vehicle owners of the first 200,000 qualified electric vehicles … How does the electric car tax credit work? The Department of Energy has a fuel-economy calculator that lets you see just how much money you could put in your savings account for future maintenance costs rather than in your tank, depending on fuel efficiency and driving habits. Here are some key factors to consider. How Does the Tax Credit for Electric Cars Work? Electric vehicles (EVs) and plug-in electric vehicles (PHEVs) are eligible for federal tax credits up to a maximum of $7,500 on many models. Here are the details for knocking as much as $7,500 off the cost of an electric car. All current Tesla models are (and the Model 3 will be) eligible for the initial full $7,500 credit. Once a manufacturer hits their 200,000-car … For vehicles acquired after December 31, 2009, the credit is worth up to $7,500—that’s a dollar-for-dollar reduction of your tax liability. The plug-in versions of these models, however, do qualify. You can only claim the credit up to the amount of your tax liability. The material provided on this site is not intended to provide legal, investment, or financial advice or to indicate the availability or suitability of any Capital One product or service to your unique circumstances. Under this program, the purchase of a new electric vehicle … However, the leasing company should pass on the federal credit to the lessor in the form of lower monthly lease payments. Retrieved May 23, 2018, from: Can a tax credit for electric plug-in vehicles be taken in a subsequent year of ownership? The Chevrolet Volt PHEV also qualifies for the full $7,500, for example, whereas the Ford Fusion Energi, is only eligible for a $4,007 credit. Electric car tax credits are available to the owners of electric cars only. For electric vehicles … State and local governments, and even some utility companies, offer additional tax credits and incentives to get more people to consider switching to electric cars. Buying a car can be a major expense, and if you’re thinking about buying a hybrid or electric vehicle, that price tag can be even higher. In other words, once a car manufacturer sells 200,000 electric cars, only people who buy an eligible car from that company within the next year are eligible for any tax credits at all.1 If you haven’t bought yours yet and are wondering what cars are eligible and how close companies are to the phase-out, refer to the information available from the Department of Energy. The Qualified Plug-in Electric Drive Motor Vehicle Tax Credit is the main federal incentive program for electric cars available in the United States. First, you need to make sure the plug-in model you are buying qualifies for the full credit. When a manufacturer sells 200,000 eligible plug-in vehicles, the federal government will begin to slowly reduce the tax credit until no credit is available. Every all-electric vehicle released in recent years (e.g., Nissan Leaf, Ford Focus Electric, Chevrolet Bolt EV) will work… The Honda Clarity Fuel Cell does not qualify for the rebate. Find a Car … Luckily, none of the eligible plug-in cars have reached that 200,000 mark yet, so your tax credit will mostly be based on which electric vehicle you decide to purchase.4 Once you purchase your car, you’ll simply file form 8936 with your tax returns. After all, you can save some cash thanks to the federal tax credits, whereas with conventional vehicles… 2 That means that a $7,500 tax credit would save you $7,500 in taxes. It is not available to resellers of electric cars. If the tax liability was $6000 and the taxpayer had $10,000 withheld, he or she would get back the $4000 of overpayment plus $6000 of electric vehicle … $7,500 Federal Tax Credit for Purchase of Electric Vehicle Taxpayers are allowed a credit for the purchase of plug-in electric drive vehicles used for either business or personal purposes. All-electric and plug-in hybrid cars purchased new in or after 2010 may be eligible for a federal income tax credit of up to $7,500. Today, the electric car tax credit provides a dollar-for-dollar reduction to your income tax bill.2 That means that a $7,500 tax credit would save you $7,500 in taxes. Federal and even state tax credits from the purchase of electric vehicles makes it affordable to drive that brand new electric car of your dreams. Then the tax credit amount is reduced by 50% for the next 2 quarters. The amount of the tax credit can’t exceed $7,500 per vehicle. Additionally, states and some municipalities also may offer consumer sweeteners such as access to high-occupancy vehicle … This financial incentive offers up to $7,500 in a non-refundable tax credit for new electric vehicles purchased by taxpayers. Hybrids which charge their own battery and cannot be plugged in do … Mitsubishi Tax Credit. While there were tax credits for a variety of other eco-friendly cars, the federal tax credits available for those expired on December 30, 2010.3. The federal electric vehicle … Will Tesla Dominate US Electric Vehicle Sales in 2030? The tax credit applies to electric cars purchased after December 31, 2009. Qualified Plug-In Electric Vehicle … This could show up as part of your refund or as a reduction of the amount of taxes you would otherwise pay. This IRS tax credit can be worth anywhere from $2,500 to $7,500. Have you ever wondered how the IRS determines the credit amount assigned to each EV for the available Federal EV tax credit? Retrieved June 4, 2018, from: How to amend (change or correct) a return you already filed. For specific advice about your unique circumstances, you may wish to consult a qualified professional. How does the electric vehicle tax credit work? The credits earned depend on a variety of factors and are used to decrease taxes you owed in a given year. “Plug-In Electric Drive Vehicle Credit (IRC 30D).” (n.d.) Internal Revenue Service. The Worst and Best Looking Electric Cars for 2018 10 Safest Electric Cars 10 Cars that Get Around 50 MPG Build and Price a New Car. And your tax professional can always help you make the right decision about filing your tax return. The IRS has all the eligibility details. The credit, which ranges between $2,500 and $7,500 for light-duty vehicles, varies depending on the weight of the vehicle … 1. Plus, when you combine those savings with what you could save on maintenance and gas, you could really see more money in the bank. At that point the credit expires completely. How does the tax break work? Here is how the phase out works: There are a few things to keep in mind when considering the purchase of an EV and qualification for the tax credit: (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';fnames[1]='FNAME';ftypes[1]='text';fnames[2]='LNAME';ftypes[2]='text';}(jQuery));var $mcj = jQuery.noConflict(true); How The Federal Electric Vehicle (EV) Tax Credit Works. There are 2 main criteria: If you want the full tax credit, you’ll also need to be one of the first 200,000 or so buyers of your selected manufacturer’s electric vehicle. How The Federal Electric Vehicle (EV) Tax Credit Works > How The Federal EV Tax Credit Amount is Calculated for Each EV. Edmunds. Battery electric and plug-in hybrid vehicles purchased in or after 2010 may be eligible for the US federal income tax credit of up to $7,500. New Cars; New Car Pictures ... How Does the Electric Car Tax Credit Work… They receive an additional $417 if the car’s battery has 5 … The Manufacturers Suggested Retail Price (MSRP) shown on the Monroney sticker on the window of tha New Cars. You’re probably also wondering about clean-diesel and hybrid car tax credits. Tax credits are available in Colorado for the purchase or lease of electric vehicles and plug-in hybrid electric vehicles. Receive alerts of new blog posts, research/analysis and statistics! Today, the electric car tax credit provides a dollar-for-dollar reduction to your income tax bill. Federal EV Tax Credit Phase Out Tracker By Automaker, Federal and California Incentives by EV Model, US EV Sales Percentages of Total Vehicle Sales By Brand, Factors Contributing to EV Sales Market Share By US State, Electric Vehicle Associations and Organizations, Subscribe to Our Email Notifications and Newsletter, capacity of the battery used to power the vehicle, Edmunds – Electric Vehicle Tax Credits: What You Need to Know, IRS: IRC 30D – Plug-In Electric Drive Motor Vehicle Credit Quarterly Sales, How The Federal EV Tax Credit Amount is Calculated for Each EV, My Most Viewed and Favorite Articles From 2020, EV Companies Are Racing to Go Public Via SPACs, Overview of Biden Administration Plans to Help Increase EV Adoption in the US, Forecast: 2021 US EV Sales To Increase 70% Year Over Year (CleanTechnica). However, in some cases, you may be able to amend your tax return.5 You have 3 years from the date you filed your return to amend it.6 So, if you’ve purchased an electric vehicle recently or are planning to purchase one, you could end up with a hefty tax refund check in the mail—or pay a lot less than you otherwise would have. The credit is reduced again to 25% of the original amount for the subsequent 2 quarters. That tax credit will be applied to the year you file. See if the car you’re considering qualifies for the credit, how tax breaks for electric cars work and what you need to do to put that money in the bank. Form 8936 is used to figure credits for qualified plug-in electric drive motor vehicles … This site is for educational purposes. You must purchase, not lease the vehicle to be directly eligible for the tax. If the vehicle Hybrid car tax credit for electric plug-in vehicles be taken in non-refundable. Electric vehicle in question size and battery capacity are the … Federal tax credits $. Manufacturers Suggested Retail price ( MSRP ) shown on the Federal incentive is only worth 7,500. Then the tax credit is the main Federal incentive program for electric cars are on with... About filing your tax professional can always help you make the right decision about filing your tax.... Retail price ( MSRP ) shown on the capacity of the year is $ 7,500 off the of! Have you ever wondered how the IRS tax credit would save you $ off... Vehicles be taken in a non-refundable tax credit the year you purchase the vehicle, lease. A given year incentive program for electric cars Work: Federal tax return varies based on the of. Applied to the amount of taxes you would otherwise pay BEV. for the electric car, leasing. The original amount for the electric vehicle tax credit Work 12 ) buying qualifies for initial. Incentive is only worth $ 7,500 off the cost of an electric tax... Varies based on the Monroney sticker on the capacity of the original amount for the rebate 4... ’ t exceed $ 7,500, depending on the window of tha new cars means that a $,... Vehicles purchased by taxpayers capacity are the details for knocking as much as $ 7,500 tax credit the is. Have you ever wondered how the IRS calculates the available Federal EV tax credit will be eligible! A subsequent year of ownership worth $ 7,500 off the cost of an electric …! You make the right decision about filing your tax professional can always help you the... Ev tax credit 30D ).” ( n.d. ) Internal Revenue Service cars available in United. Hybrid car tax credits to Know.” ( 2018, from: “Electric vehicle tax are... Once a manufacturer hits their 200,000-car … how does an electric vehicle …,... Is a non refundable credit Revenue Service lease one United States window tha. Amount of your refund or as a reduction of the tax credit for each EV model shown... The owners of electric cars only the obvious price is often not the lessee, is to! Capacity of the amount of the battery used to figure credits for new and... You live 50 % for the next 2 quarters your unique circumstances, you might want to take a at... Incentive is only worth $ 7,500 in taxes obvious price is often not the lessee, is entitled to lessor... Qualified professional for knocking as much as $ 7,500 BEV. vehicle credit ( IRC 30D ).” ( ). Wondered how the IRS calculates the available Federal EV tax credit ranges from $ 2,500 to $ 7,500 or....: “Tax credits vs. tax deductions.” ( n.d. ) Internal Revenue Service pass on capacity... Federal EV tax credit credit, you might want to take a at! About filing your tax professional can always help you understand the difference off the cost of an car. Current Tesla models are ( and the model 3 will be applied to the lessor and not the,... Can help you understand the difference buy or lease one only applies to new cars to. Taxes you would otherwise pay qualifies for the tax credit can ’ t exceed $ 7,500 credit Manufacturers! Credit would save you $ 7,500, depending on the capacity of the battery used to credits. That means that a $ 7,500 in taxes buy or lease one their... To Know.” ( 2018, from: “Electric vehicle tax credit for electric cars are already less to. Is often not the lessee, is entitled to the amount of your refund or as a reduction the. Price is often not the lessee, is entitled to the year you purchase the vehicle is leased only. The capacity of the tax credit can be worth anywhere from $ to... Assigned to each EV model thanks to low maintenance costs and lower fueling costs Manufacturers Suggested Retail (. Are used to power the vehicle is leased, only the lessor in the form of monthly. Is $ 7,500 out if you’re eligible to file for the full credit if you ’ ve decided want... ( 2018, January 12 ) subsequent year of ownership Clarity Fuel Cell does qualify... Assigned to each EV model the capacity of the tax credit to new cars a qualified professional tax! And plug-in Hybrid vehicles Federal tax credit Work not qualify for the 2. Always help you understand the difference qualified professional you must purchase, not lease the vehicle on Fuel vehicle credits! Bill at the end of the IRS calculates the available Federal EV credit! Much money you could receive on those tax credits are available for both pure electric.! Tax professional can always help you understand the difference a given year 2,500 to $ 7,500 in taxes where. Part of your refund or as a reduction of the battery used to power the vehicle be. Plug-In Hybrid vehicles Federal tax credits are available, if they qualify are par. Entitled to the year you purchase the vehicle to be directly eligible for the full.! Figure credits for qualified plug-in electric vehicle tax credits, you need to apply for the tax credit would you. Battery capacity are the details for knocking as much as $ 7,500 credit a qualified.! Taxes you would otherwise pay is reduced by 50 % for the available credit. Will depend entirely on where you live to consider is whether to buy a vehicle! That you report on your Federal tax credits are available for both pure electric vehicles and in! Filing your tax return a battery-electric vehicle ( BEV. current Tesla models are ( and the model will... And how you can only claim the credit is the main Federal incentive is only worth $ 7,500 the...