As electric car sales keep growing, many new and potential consumers have queries about being eligible for an associated tax credit for electric cars.
This eligibility is not a straightforward ‘yes’ or ‘no’ question… the amount you may qualify for differs because of several distinct factors. Moreover, there are other possible earnings accessible to you that you might not even notice though.
Table of contents
- How does an federal tax credit work for my EV?
- How much is the allied tax credit?
- Other allied tax credit policies to note as an electric car owner
- Can a family get multiple allied tax credits?
- The Biden administration appears to extend electric cars.
- Status of the $12,500 allied tax credit for EVs
- Saved EV tax credits are nearer than ever.
- Does your electric car eligible for a tax credit?
- Full-electric cars
- Plug-in hybrid electric cars (PHEVs)
- Other tax credits accessible for electric car owners
- State tax incentives
- Tax incentives for Tesla purchasers
- Tax incentives on electric cars are worth the study.
How does a federal tax credit work for EV?
The idea, in theory, is a bit simple, “All electric and plug-in hybrid vehicles that were purchased in or after 2010 may be eligible for a federal income tax credit of up to $7,500,” as per the US Department of Energy.
With that stated, you cannot just go out and purchase an electric car and anticipate Uncle Sam to cut $7,500 off your taxes in April. In real life, the amount you are eligible for is according to your revenue and the size of the electric battery in your car.
How much is the tax credit?
Primarily, it’s important to know three little terms the government slides in before the $7,500 credit “may” and “up to.” As in, you may be eligible for up to $7,500 in allied tax credit for your electric car. At first sight, this credit may sound such a flat rate, but that is sadly not the case.
For instance, if you bought a Nissan LEAF and owed, say, $3,500 in revenue tax in 2022, that is the state tax credit you would receive. If you owed $10,000 in state revenue tax, you would be eligible for the $7,500 credit.
It’s important to record that any unutilized part of the $7,500 is not accessible as a rebate or a credit for next year’s taxes. Failure.
Other Allied tax credit regulations to note as an electric car owner
Hopefully, you better know how the government regulates tax credits for people according to your federal revenue tax and car, yet it’s vital to stay aware of additional penalty print. After all, this is the US government.
Initially, know that these federal tax credits will not last forever and may have already lapsed for your car. As the demand for electric cars rises, sales drive specific makers over the pre-planned threshold of eligible sales… for now.
This includes US car manufacturers such as Tesla, who led over 200,000 eligible plug-in electrics sold several years ago. As a result, one no longer be eligible for any federal tax credit. Don’t worry, Owners of Tesla, there are still means to save funds on your EV purchase! See the “tax incentives for Tesla buyers” section below.
Other car manufacturers such as General Motors have also achieved that threshold and could benefit from amended law to bring back the credit… more on that later. Most recently, Toyota declared it’s on the edge of passing 200,000 EVs sold therefore losing qualification for federal tax credits.
At this rate, the Japanese carmaker anticipates reaching 200k in late June 2022. If that is the case, credits for Toyota EVs (PHEVs rather) will be slowly eliminated next year, so you may still be eligible for a credit, yet it will be reduced on borrowed period.
Another significant rule to remember is that the federal tax credit cannot be passed on. This credit applies to the first registered owner only. That means any used EVs you already have or are going to buy are immediately not eligible.
The same rules also apply to any rent on an electric car. In this case, the tax credit goes to the maker that’s offering the rent to you. Though, a car manufacturer might be willing to apply the tax credit to the cost of your rent to aid lower your payments, that’s not assured. It’s certainly worth a query!
Can a family receive multiple Federal tax credits?
Some readers have reached out and inquired if they are eligible for multiple tax credits if they buy more than one EV in a calendar year. The brief answer is yes.
Though, we must introduce this by relaying that the IRS is the official source for all federal tax details and is accountable for managing the federal plug-in car tax credits. It is best to ask an eligible tax expert to ensure you do qualify before buying multiple electric cars.
Being stated that, the fueleconomy.gov team was unaware of any limitations on the number of cars you may claim tax credits for, given that you have enough federal tax charge for that purchase year.
With that said, if two people in your household each purchase an eligible vehicle and both have $7,500 in federal tax burden, then each should be able to claim the tax credit.
If one person buys two qualified plug-in electric cars with tax credits up to $7,500 for each car, they must be able to claim $15,000 in tax credits if their federal tax charge is $15,000 or more for the calendar year in which they bought those cars.
Again, talk to a tax expert or the IRS to be sure this is feasible.
The Biden administration seems to expand electric cars
President Biden initially promised to make the country’s full federal fleet fully electric. Well, that hasn’t a bit gone to plan yet. However, the White House has released two acts to expand EV adoption, one of which was signed by the President and includes investment for heavily expanded EV charging infrastructure.
Previously, there were stories that the federal tax credit would be increased to $10,000. In the current $174 billion funding plan of President Biden for electrification, the tax credit was rapidly introduced as a reform. However, the summary remained indefinite regarding the reform, just verifying that it will just not take the form of tax refunds but “point of sale rebates” as well, and it will now be for “American-made EVs.”
The second and larger act recently sill sits in Parliament contains the “Build Back Better Act” of Biden and subsequent increases to the federal tax credit. Here’s where it recently stands.
Status of the $12,500 federal tax credit for EVs
When the above-stated $1.2 trillion infrastructure act was passed in November of 2021, House Speaker Nancy Pelosi had planned to be in favor of the $1.75 trillion “Build Back Better Act” as well as the $12,500 federal EV tax credit within it.
Though, a small group of moderates in the House declined to support the law without a price approximate from the Congressional Budget Office (CBO). As a settlement, the House approved a legislative vote needed to open the “Build Back Better Act” of Biden to passage, following an official CBO price approximate.
While the bigger infrastructure act and social security net did automatically pass through the House, the Senate was not able to come to terms on an act that gathers enough votes, thus missing the deadline of the President to get Build Back Better signed before the end of last year.
Saved EV tax credits are nearer than ever
The US Senate shared last week it is going forward to be in favor of EV tax credit reform after Senator Joe Manchin took a break from gasping coal to finally agree to include funding to restrain climate change.
One of the most important portions of the act (to Electrek) includes the long-awaited struggles over electric car tax credit reform. In this restatement of the act, access to the tax credit will come back to those who have already beat the threshold, including Tesla, GM cars, and most recently, Toyota.
We have known that the reform act (if passed) will apply to EV distributed after December 31 of this year as well. Here’s the newest restatement of the terms of the act:
- Federal tax credit for EVs would remain at $7,500
- The tax credit cap for car manufacturers after they reach 200,000 EVs sold is removed, making GM, Tesla and Toyota once again qualified.
- The language in the act shows that the tax credit would be executed at the point of sale rather than on taxes at the end of the tax year.
- To get the entire credit, the EV must be assembled in North America; most of the battery parts required to come from North America, and contain a specific percentage of minerals from regions with free trade contracts with the USA.
- Includes a new federal tax credit of $4,000 for used EVs
- Includes zero-excretions vans, SUVs, and trucks with MSRPs up to $80,000
- Electric sedans priced up to $55,000 MSRP are also eligible.
- The all-electric car tax credit will be accessible to people reporting adjusted gross revenues of $150,000 or less, or $300,000 for combined filers.
You can see the terms of the agreement in greater detail here. While the act now seems bright with Senator Manchin onboard, it is not yet legislation until it passes through the Senate vote and hits POTUS’ desk for the final signature.
Does your electric car eligible for the tax credit?
Now that you know what obstacles you may have to overcome to be eligible for the federal tax credit, let’s see how much that EV in your pathway might be able to save you this year.
Please note that these eligible vehicles are relevant during this post has been issued. The Electrek will update the site as the car, and their designated credits vary.
| Make and Model | Full Tax Credit |
| AUDI | |
| e-tron Sportback (2020-2022) | $7,500 |
| e-tron SUV (2019, 2021-2022) | $7,500 |
| e-tron GT / RS e-tron GT (2022) | $7,500 |
| e-tron S (Standard and Sportback) | $7,500 |
| Q4 50 e-tron Quattro | $7,500 |
| BMW | |
| i3 Sedan (2014-2021) | $7,500 |
| i3s (2018-2021) | $7,500 |
| i4 eDrive40/M50 Gran Coupe (2022) | $7,500 |
| iX xDrive50/M60 (2022) | $7,500 |
| BYD | |
| e6 (2012-2017) | $7,500 |
| ELECTRIC LAST MILE SOLUTIONS (ELMS) | |
| ELMS Urban Delivery (2022) | $7,500 |
| FIAT | |
| 500e (2013-2019) | $7,500 |
| FORD | |
| Focus EV (2012-2018) | $7,500 |
| Mustang Mach-E (all 2021/2022 trims including GT) | $7,500 |
| E-Transit (2022) | $7,500 |
| F-150 Lightning (standard/extended range) (2022) | $7,500 |
| GENERAL MOTORS (GM) | |
| Not currently eligible for tax credits | ––––– |
| GENESIS | |
| GV60 (2023) | $7,500 |
| HYUNDAI | |
| Ioniq Electric (2017-2021) | $7,500 |
| Ioniq 5 (2022) | $7,500 |
| Kona Electric (2019-2022) | $7,500 |
| JAGUAR | |
| I-Pace (2019-2022) | $7,500 |
| I-Pace HSE (2022-2023) | $7,500 |
| KANDI | |
| EX3 (2019-2021) | $7,500 |
| K22 (2019-2020) | $7,500 |
| K23 (2020-2022) | $7,500 |
| K27 (2020-2022) | $7,500 |
| KIA | |
| Niro EV (2019-2022) | $7,500 |
| Soul Electric (2015-2020) | $7,500 |
| EV6 (58 kWh, 77.4 kWh) (2022) | $7,500 |
| LUCID MOTORS | |
| Lucid Air Dream Edition (2022) | $7,500 |
| Lucid Air Grand Touring (2022) | $7,500 |
| MAZDA | |
| MX-30 (2022) | $7,500 |
| MERCEDES-BENZ | |
| AMG EQS (2022) | $7,500 |
| EQS 450+ (2022) | $7,500 |
| EQS 580 4matic (2022) | $7,500 |
| B-Class EV (2014-2017) | $7,500 |
| MINI | |
| Cooper S E Hardtop 2 & 4 Door (2020-2023) | $7,500 |
| MITSUBISHI | |
| i-MiEV (2012, 2014, 2016, 2017) | $7,500 |
| NISSAN | |
| LEAF (2011-2022) | $7,500 |
| POLESTAR | |
| Polestar 2 (2021) | $7,500 |
| Polestar 2 Long Range – Single & Dual Motor (2022) | $7,500 |
| PORSCHE | |
| Taycan (2020-2022) (all trims) | $7,500 |
| RIVIAN | |
| R1T (2022) | $7,500 |
| R1S (2022) | $7,500 |
| EDV 700 (2022) | $7,500 |
| SMART USA |
…
(Courtesy The Electrek)
