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Tax credits for electric vehicles: what you need to know in 2022

Tax credits for electric vehicles: what you need to know in 2022

Electric vehicles are no longer just a great car option for climate-conscious drivers. The EV market has grown tremendously in recent years and today EVs vary wildly in luxury, style and price. But electric driving can also bring additional money-saving benefits. The electric car tax credit is a financial incentive given to those who purchase an electric vehicle and can save you thousands depending on your home state.

EV Fast Facts

The easiest way to see how much the market has grown is to look at recent EV information.

  • 3.47 percent of new registrations in 2021 were electric vehicles (Experian).
  • California has the highest percentage of new EV registrations in 2021 at 35.3 percent (Experian).
  • Luxury brands account for 78.7 percent of new registrations (Experian).
  • In 2021 there were 10 million EVs on the road (S&P Global).
  • The state of California has the highest number of charging stations with 13,715, followed by New York, Florida and Texas (US Department of Energy).

What is the EV tax credit?

The EV tax credit is a federal incentive to encourage drivers to buy an electric vehicle. This incentive is not a check you receive in the mail after purchasing a vehicle, but rather a $7,500 tax credit that you qualify for. This credit applies to all electric and plug-in vehicles, but specific credit amounts can be found through the U.S. Department of Energy website, fueleconomy.org

How to qualify?

In order to qualify for defined benefits, your vehicle must meet certain specifications, including:

  • Purchased after December 31, 2009.
  • Have a traction battery.
  • Maintain a battery capacity of at least four kilowatt hours (kWh).
  • Use an external plug-in charging source.
  • Maintain a weight rating of up to 14,000 pounds.
  • Comply with emission standards.

It is also important to remember that purchasing the vehicle alone does not guarantee that you will get the tax credit. You must file Form 8936 with the tax authorities.

Are lease cars eligible?

The tax credit does not apply to those who lease electric vehicles. Instead, that money goes to the landlord. But this can still reduce a monthly payment — if the landlord chooses to include that incentive in your lease. Mention this during the negotiations to try and save money.

Will the Federal EV Tax Rebate Always Be There?

It’s likely that the credit will stick around indefinitely, especially with increasing pressure on more climate-conscious vehicles. But the available vehicles are constantly shifting. This is due to the phasing out structure of tax credits.

When a manufacturer reaches a certain number of credits, those vehicles are no longer eligible. This limit varies depending on the vehicle manufacturer, so it’s important to check if the vehicle you want to buy is still available for credit.

Can a household get multiple EV discounts?

If two members of the same household purchase electric vehicles for themselves, they can claim the credit for their individual car separately. If the two buy an EV together, the credit can only be claimed once.

Income and the EV tax credit

Any driver who submits necessary information for an eligible vehicle using Form 8936 may be eligible for an EV tax credit. But the type and amount of income you receive can affect the tax credits you receive.

State and local tax credits and incentives for electric vehicles

Unfortunately, not every state offers EV tax credits and incentives. So, before you buy a charging station for your garage, determine how much you can save in your home state.

EV tax credits by car brand

Here are some specific EV tax credits offered by car brands. Just as every state is different, you should consider the advantages for one vehicle brand over another.

vehicle brand Available credit
Audi $4,502 to $7,500
BMW $3,793 to $7,500
Chevrolet No longer eligible
Fiat/Chrysler $7,500
Ford $4,007 to $7,500
Honda $3,626 to $7,500
Hyundai $4,543 to $7,500
Jaguar/Land Rover $6,295 to $7,500
kia $4,543 to $7,500
Mercedes $3,501 to $7,500
Mitsubishi $5,836 to $7,500
Nissan $7,500
Porsche $3,667 to $7,500
Subaru $4,502
Tesla No longer eligible
Toyota $2,500 to $7,500
Volkswagen $7,500
Volvo $5,002 to $7,500

Information collected from irs.gov

Making the decision to buy an EV

Just like buying a traditional gas vehicle, making the decision to dive into the world of buying electric vehicles requires questioning several factors such as cost, size, and usability. But buying an EV requires extra thought. Here are some questions to ask yourself before opting out of an electric vehicle.

  • Is charging available in my region? Before you decide to buy an electric car, it is important to check whether charging stations are available in your area. Use resources such as those provided through EVgo to explore options prior to purchase.
  • What is the vehicle range? You need to confirm that your new vehicle’s range will suit your typical driving routine – and any trips you plan.
  • What is the expected vehicle maintenance? While you’ll need to set aside some money for service checks, don’t worry about the cost of an oil change or other emissions equipment.
  • How much does EV insurance cost? The cost of EV insurance varies, so it’s best to research and determine which lender will best suit your needs. Check out Bankrate’s guide to electric car insurance.
  • Should I lease an EV? Consider leasing rather than buying if you can find low-cost incentives from the manufacturer or if you prefer to replace your vehicle every few years.
  • Should I buy new or used? Similar to leasing versus buying, consider available incentives in terms of the year of vehicles available in your budget.

The Future of EV Tax Credits

Electric vehicles are still some of the most expensive on the market, and until more are produced they will predictably remain at a steeper price. But because green vehicle manufacturers are making it a priority, and the government wants to reward that, the tax credit isn’t likely to go away anytime soon. And if you’ve been interested in going green for a while, now might be a good time to jump into action.

This is especially true following President Biden’s executive order in August 2021 that half of all new vehicles sold in the US must be electric by 2030. of electric car options and save extra money through an available tax credit.

it comes down to

When it comes time to purchase your new set of wheels, consider buying an electric vehicle to take advantage of the EV tax credit. When it comes time to find financing and insurance, compare rates and different costs of buying EV instead of traditional.