If you're thinking about buying an electric vehicle (EV), the federal tax credit can save you a lot money.
The federal tax credit was put in place to encourage people to buy more energy efficient vehicles. The thing is, the tax credit only applies to eligible models for a limited time.
Once an automaker sells more than 200,000 EVs, the tax credit begins to be reduced until it is phased out altogether.
To get an idea of how the 200,000-vehicle phaseout works, let’s use the Chevrolet Bolt as an example:
Your eligibility hinges on a number of factors, but the most important is that your car must meet the government’s definition of an electric vehicle.
That means it must get power from an external electric source. Here are some other tax credit requirements you need to know:
- It must be a new vehicle purchased in or after 2010
- It must weigh under 14,000 pounds
- It must have at least four wheels
- It must use a battery with at least 4 kilowatt hours of storage
- It must be driven mostly in the United States
But if you have a fully electric vehicle and meet all the other criteria we mentioned above, there's a good chance you qualify for the full amount.
On the other hand, if you owe the IRS $3,000 in taxes and you buy an EV eligible for the full $7,500, you’ll only get a $4,500 credit. See how that works?
On a federal level, there is an Alternative Fuel Infrastructure Tax Credit for fueling equipment installed before December 31, 2020.
An increasing number of states offer emission exemptions and rebates on charging electric vehicles and some have incentives for actually purchasing an EV.
While not an exhaustive list of all the EV subsidies, here are states with major incentives toward buying an EV:
You may be wondering which vehicles have tax credits. Popular electric vehicles like the Chevy Bolt and Spark have already reached thresholds that have cut their tax credits — and Tesla's have completely expired.
The credit also won’t be available for General Motors vehicles bought after March 31, 2020, according to the IRS.
But there are other EVs who still have their full tax credits. Here are some examples of the most popular EVs and their tax credit amount, according to the U.S. Department of Energy:
Check out the Department of Energy's full sortable list here.
As you can see, electric vehicles are benefiting from subsidies on the state and federal level — so you should take advantage while you can. The tax credits, as they’re currently written, will only last so long.
If you choose to lease an EV to see if you like it, remember that tax credit eligibility will remain with the leasing company. It’s a good idea to ask the dealership if the tax credit is figured into the lease price.
If you're still on the fence, here are some reasons why an EV is cheaper than a gas-powered vehicle.