Electric vehicle tax credit: what you need to know in 2022
Electric vehicles are no longer just a great car option for climate-conscious drivers. The electric vehicle market has grown significantly over the past two years, and electric vehicles today vary widely in luxury, style, and price. But driving electric can also come with additional money-saving benefits. The Electric Car Tax Credit is a financial incentive given to those who buy an electric vehicle and, depending on your country of origin, can save you thousands of dollars.
Quick facts about electric vehicles
The easiest way to see how much the market has grown is to look at recent information on electric vehicles.
- 3.47% of new registrations in 2021 were electric vehicles (Experian).
- California has the highest percentage of new electric vehicle registrations in 2021 at 35.3% (Experian).
- Luxury brands account for 78.7% of new listings (Experian).
- There were 10 million electric vehicles on the road in 2021 (S&P Global).
- The state of California has the most charging stations with 13,715, followed by New York, Florida and Texas (US Department of Energy).
What is the EV tax credit?
The Electric Vehicle Tax Credit is a federal incentive designed to encourage drivers to purchase an electric vehicle. This incentive is not a check you receive in the mail following the purchase of a vehicle, but rather a tax credit worth $7,500 for which you become eligible. This credit applies to all electric and plug-in vehicles, but specific credit amounts can be found through the US Department of Energy website, fueleconomy.org.
How to qualify
To be eligible for available incentives, your vehicle must meet certain specifications, including:
- Have been purchased after December 31, 2009.
- Have a traction battery.
- Maintain a battery capacity of at least four kilowatt hours (kWh).
- Use an external plug-in charging source.
- Hold a weight rating of up to 14,000 lbs.
- Comply with emission standards.
It is also important to remember that the purchase of the vehicle alone does not guarantee obtaining the tax credit. You must deposit Form 8936 with the taxman.
Are leased vehicles eligible?
The tax credit does not apply to lessees of electric vehicles. Instead, that money will go to the lessor. But it can still reduce a monthly payment – if the lessor chooses to factor this incentive into your rental agreement. Mention it when negotiating to try and save some money.
Will the federal electric vehicle tax credit still be around?
The credit is likely to last indefinitely, especially with increased pressure for more climate-friendly vehicles. But the vehicles available are constantly changing. This is due to the phasing out structure of tax credits.
When a manufacturer reaches a certain number of credits, these vehicles will no longer be eligible. This cap varies by vehicle manufacturer, so it is important to check if the vehicle you intend to purchase is still available for credit.
Can a household benefit from several EV tax credits?
If two members of the same household buy electric vehicles for themselves, they will be able to claim the credit for their individual cars separately. If the two buy an EV together, the credit can only be claimed once.
Income and the EV tax credit
Any driver who submits the necessary information for an eligible vehicle using Form 8936 may be eligible for an EV tax credit. But the type and amount of income you receive can affect the tax credits you receive.
Tax credits and incentives for national and local electric vehicles
Unfortunately, not all states offer tax credits and incentives for electric vehicles. So before you jump into buying a charging station for your garage, figure out how much you can save in your home country.
EV tax credits by vehicle brand
Here are some specific electric vehicle tax credits offered by vehicle brands. Just as every state differs, consider the advantages of one brand of vehicle over another.
|Vehicle brand||Credit available|
|Audi||$4,502 to $7,500|
|BMW||$3,793 to $7,500|
|Chevy||No longer eligible|
|Ford||$4,007 to $7,500|
|Honda||$3,626 to $7,500|
|hyundai||$4,543 to $7,500|
|Jaguar/Land Rover||$6,295 to $7,500|
|KIA||$4,543 to $7,500|
|mercedes||$3,501 to $7,500|
|Mitsubishi||$5,836 to $7,500|
|Porsche||$3,667 to $7,500|
|You’re here||No longer eligible|
|Toyota||$2,500 to $7,500|
|VOLVO||$5,002 to $7,500|
Information collected from irs.gov
Making the decision to buy an EV
Just like buying a traditional gas-powered vehicle, deciding to dive into the world of buying an electric vehicle requires considering several factors, such as cost, size and practicality. . But buying an electric vehicle requires additional consideration. Here are some questions to ask yourself before signing on an electric vehicle.
- Is charging available in my area? Before deciding to buy an EV, it is important to check that there are charging stations available in your area. Use resources like those offered by EVgo to explore the options before buying.
- What is the vehicle range? You will need to confirm that the range of your new vehicle matches your usual driving routine and all the trips you plan.
- What is the planned maintenance of the vehicle? Although you have to set aside money for service checks, you won’t have to worry about the costs of oil changes or other emission control equipment.
- How much does EV insurance cost? The cost of EV insurance therefore varies best to research and determine which lender best suits your needs. Check out Bankrate’s guide to electric vehicle insurance.
- Should I rent an EV? Consider leasing rather than buying if you are able to find favorable manufacturer incentives or prefer to change vehicles every few years.
- Should I buy new or used? Similar to leasing versus buying, consider the incentives available based on the year of vehicles available within your budget.
The future of electric vehicle tax credits
Electric vehicles are still among the most expensive on the market, and until more are produced, they will predictably remain at a higher price. But because automakers are making green vehicles a priority and the government is looking to reward that, the tax credit is unlikely to disappear any time soon. And if you’ve been wanting to go green for a while, now might be the time to act.
This is especially true following President Biden’s August 2021 Executive Order that half of all new vehicles sold in the United States should be electric by 2030. Although this is a percentage quite high compared to today, you may be able to take advantage of the current surge. of electric car options and save extra money with an available tax credit.
The bottom line
If it’s time to buy your new set of wheels, consider buying an electric vehicle to qualify for the EV tax credit. When the time comes to find financing and insurance, be sure to compare the rates and the different costs of buying an electric vehicle versus a traditional vehicle.