How to Save Money When Buying an EV With Tax Credits
With all the rapid advances in battery technology and scale production, electric vehicle (EV) ownership isn’t just for rich techies anymore. Governments, too, are understanding how EVs can help change transportation for the better, which is why there are so many incentives to get more people to buy EVs.
This article walks you through what you need to know about taking advantage of the latest EV government incentives, including the EV federal tax credit.
Federal Tax Credits for EVs
Anyone in the U.S. can take advantage of the EV tax credit, which is funded by the U.S. Department of Energy. The minimum tax credit available is $2,500 but can be as high as $7,500 depending on the EV’s weight and battery capacity.
A tax credit is essentially a rebate on your final tax bill. If you owe $7,500 in federal income taxes and qualify for a $7,500 EV tax credit, you won’t need to send the IRS anything. And if you don’t owe anything on your taxes, the IRS will send you a $7,500 refund.
EV Tax Credits Under the Inflation Reduction Act
Since August 2022, the Inflation Reduction Act has changed the eligibility requirements to receive the federal tax credit. Electric vehicles must now have been assembled in North America in order to be eligible for the program. You can confirm whether a new EV is eligible for the federal tax credit through the vehicle identification number (VIN). A VIN is like a social security number for cars, and the U.S. Department of Transportation can track where a vehicle has been manufactured and assembled through its VIN.
In addition, there will be new requirements regarding EV battery manufacturing and raw materials sourcing. By 2027, 80% of the battery-critical minerals will need to be extracted and processed in the U.S. or a free-trade agreement partner in order to qualify for the federal tax credit. And by 2029, EV batteries will have to be fully manufactured and assembled in North America.
Finally, an EV car must have a manufacturer’s suggested retail price (MSRP) of below $55,000 to qualify for the federal tax credit (below $80,000 for EV pickups, vans, and SUVs), and your income needs to be under $150,000 ($300,000 for joint filers).
Before you purchase an EV, ask the dealer to confirm that the vehicle is eligible for the federal EV tax credit before making a final decision.
State and Local Incentives for EV Purchases
In addition to the federal EV tax credit, you might be eligible for additional EV financial benefits depending on where you live. The most common state and local EV incentives include:
Rebates for EV purchases
Buy-back programs for older vehicles
Sales tax exemptions on EV purchases
Access to high-occupancy (HOV) lanes
Just keep in mind that state incentive programs can have different residency and purchase requirements. For example, some states offer rebates only for new EV purchases, while others provide incentives for leased and pre-owned EVs as well. And some state programs have a window in which you can apply for a rebate — typically within a few months of purchase.
When Do I Get My EV Federal Tax Credit?
You can claim your EV tax credit on your next tax return. If it turns out that your tax credit results in a refund — that is, the amount of your EV tax is more than the taxes you owe — then you can expect to receive your refund within 21 days of filing your federal taxes (occasionally, this could take a little longer).
To get your EV tax credit as quickly as possible, it’s always best to file your taxes electronically and request a direct deposit rather than a paper check.
How Can I Save More Money With an EV?
Besides the EV incentives offered at the federal, state, and local levels, people who use their EV for business purposes can take advantage of all the standard allowable deductions for vehicle use, including:
EV loan interest
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By evee Life Contributor
Published October 19, 2022 1:54AM
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