The federal EV tax credit has been available since 2010, rewarding electric car buyers with a one-time income tax credit of up to $7,500.
President Obama oversaw the passage of the EV tax credits bill, as part of his administration’s drive to get more Americans buying electric vehicles.
The credits were never intended to be permanent however, and time is running out for EV owners to take advantage.
How does an EV tax credit work?
The federal tax incentive is up to $7,500. This is the maximum available amount, and will only be paid to someone whose tax bill is $7,500 or more. If you owe less than that, you will receive a smaller tax credit, equivalent to the amount you owe.
The amount you are eligible for is also based on your vehicle’s battery size. Smaller EVs receive smaller credits.
Edmundsexplains, if you are leasing an EV, the credit goes to the owner of the asset, typically the manufacturer. Some lessors will reduce your monthly payments to factor in the credit, but it is not compulsory.
When are EV tax credits expiring?
Federal EV tax credits were always designed to incentivize Americans to buy electric, and be phased out as sales improved.
The credit expiration date is different for each manufacturer, and comes into effect after the company sells 200,000 electric vehicles.
Teslasurpassed this milestone almost three years ago, with GM only a few months behind them. This is why you can’t get tax credits for those brands anymore.
While there are plenty of other electric car manufacturers who have yet to exceed 200,000, it could happen sooner than you think. EV sales are at an all time high, and experts think they will begin
outpacing sales of gas powered vehicles by 2033.
As part of the
Growing Renewable Energy and Efficiency Now (GREEN) Act, the Biden administration has submitted a proposal to extend the current EV incentives, but the legislation still has to pass through Congress.
Are there other incentives to buy an EV?
Edmunds remind readers that there are dozens of state incentives available for electric and even hybrid vehicles. Some are not financial, but drivers get other perks like free parking or carpool lane access.
California offers a $2,000 cash rebate to anyone who buys or leases an electric car, which is probably the best state incentive out there.
Which electric cars still qualify for a federal tax credit?
As explained above, the tax credits for Tesla and General Motors have been phased out due to strong sales. Nissan is expected to surpass the threshold next year, so act quickly if you are looking to buy one of those.
All other manufacturers still qualify, including Audi, BMW, Toyota and Ford. The
Department of Energymaintains a full list of eligible electric vehicles, including the maximum credit for each one.
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