EVs are in their infancy and need all the help they can get to become more common. That's why governments at different levels are offering EV tax credits and rebates. If you're in the US and plan to buy your own EV, the rest of the article is your guide to tax credits and rebates for electric cars in the US.
Why do governments offer tax credits and rebates for electric cars?
Electric cars are cheaper to “fuel” because electricity is conventionally cheaper and has a more stable price than gas. However, electric vehicles are significantly more expensive. For example, the most affordable Tesla car, the Model 3, has a base price of $47,000 . Even other EVs with lower MRSPs have profit margins added by dealers. This makes EVs affordable for many car buyers, but the introduction of tax credits and rebates can help buyers pay less. As a result, ICE drivers will be more willing to consider switching to electric cars.
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How do tax credits and rebates for electric cars work in the US?
The most popular EV incentive is the federal income tax credit, announced under the Energy Improvement and Extension Act of 2008 . It's worth up to $7,500. However, there are some conditions for claiming the tax credit.
The credit is deducted from your federal income taxes for the year you purchased your electric car. This means you must inform your account of your purchase. If your annual tax bill is less than $7,500, the balance cannot be carried forward to the next year. This means that if your annual tax is $3,500, you will only be able to claim that amount and the remaining $4,000 will be lost.
However, if you had purchased a hybrid (the hybrid must be plug-in to qualify) instead of an all-electric model, your tax credit would be smaller. The lowest tax credit you can claim is but the actual amount depends on the size of the battery . So if you buy a Toyota Prius, you will receive less tax credit than your colleague who bought a Chevy Bolt.
Not all-electric cars qualify for the federal tax credit
One criterion is the number of electric vehicles sold by the automaker in question in the USA. in full as it will be reduced twice at six-month intervals before disappearing completely. Tesla has sold more than that, so none of the company's EVs qualify. Toyota may soon outgrow credit, too. Check the brand you want to buy to make sure you can take advantage of the tax credit.
Your EV must also have an external plug-in charging source
In addition to the federal tax credit, you may qualify for other incentives based on where you live. For example, in California, the nation's undisputed leader in electric vehicles, you may be eligible for the Clean Vehicle Rebate Project, CVRP administered by the state's Air Resources board.
CVRP offers discounts of up to $7,000 on each electric vehicle. The impact is already being felt, as California reports that zero-emission cars make up 16.2% of all new cars .
To qualify for the CVRP discount, your electric car must cost no more than $45,000. This means that no Tesla cars qualify for this discount. However, cheaper models like the Chevy Bolt and new Ford F-150 Lightning can get the discount.
In New York, electric vehicle buyers can get up to a $2,000 discount on new battery-powered automobiles under the Clean Drive Program . However, you must agree to keep the vehicle for at least three years and be a resident of the state.
Other sources of EV incentives include local utilities or energy departments. For example, Rocky Mountain Power will give you a $200 discount when you purchase and install an electric vehicle charging station at home.
By combining all available EV incentives, you can significantly reduce the amount of money you spend on your EV.
The Future of Electric Car Taxes and Rebates in the US
Taxes and rebates on EV cars may not last forever. However, they don't seem to be ending anytime soon. For example, the current administration is pushing to extend the federal tax credit so that all EV manufacturers become eligible again and even . Similarly, ARB wants to increase the rebate amount by about $500 .
Many new electric vehicle buyers in the US will qualify for at least one of these electric vehicle tax credits. When you're ready to buy your own electric car, you can check out what's available to make the switch cheaper.
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