Getting tax incentives for electric cars is just one of many reasons to consider purchasing a new vehicle. Owning an electric car can also be environmentally friendly, eliminating CO2 emissions and drastically reducing your carbon footprint. And with soaring gas prices and expensive maintenance costs, electric cars can also be more cost-efficient in the long run.
However, it can be hard for people to justify the hefty price tag upfront. But if you consider the federal tax credit for electric cars, you might realize that it’s worth your while.
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Are there tax incentives for electric cars?
Yes – purchasing an electric or plug-in hybrid car means you might be eligible for a federal tax credit. However, there are some stipulations to keep in mind.
First of all, you have to purchase a new vehicle. Leasing an electric car does not qualify you for a tax incentive (only the leasing agent gets the deduction). Also, the car needs to have been purchased in 2010 or later. It also needs an external plug-in charger as well as a traction battery with four kilowatt-hours’ (kWh) capacity.
Finally, the tax credit only applies to the first 200,000 sales from the car company. Once a manufacturer crosses that threshold, their cars are no longer eligible for credit. At the moment, Tesla and GM electric cars are the only two companies that do not qualify for the incentive program. However, companies like Toyota, Ford, and Nissan have significantly increased their EV production. This means they might reach that threshold within the next few years.
Where to file if you own an electric car?
Often, tax season comes with a lot of stress as filers try to figure out what they need to put on their forms. But this year, you don’t need to worry about not knowing what to do. H&R Block offers a wide variety of products that will help you file your taxes on your own. They’ve created products that help out many people, including (but not limited to) people who are in school, work for an employer, or receive rental income. You’ll get step-by-step instructions and immediate results, and you’ll have access to a tax expert for any questions you may have.
How much is the federal tax credit for electric cars?
If your car meets the above requirements, you can apply for a tax credit during tax season. This credit can be up to $7,500 for the tax year when you purchase the car.
The exact amount of credit you’ll get depends on numerous factors, including your net taxable income. If you owe the IRS more than $7,500 in taxes, then you can apply the full amount of the credit towards payment. But if you only owe $4,000, for example, you’ll only get $4,000 from the EV tax program. This means that you can only qualify if you owe taxes that year.
The amount of credit also depends on your car’s battery size. All-electric vehicles usually qualify for the full amount, while hybrid owners may receive a reduced amount.
To encourage people to purchase electric cars, the government created the EV tax credit program. This is a tax credit that can save people thousands of dollars a year.
How do I apply for the EV tax credit?
To apply for the credit, you’ll need to fill out Form 8936 for the IRS. This form will also calculate how much credit you are entitled to receive. Remember, you can only apply for the credit during the tax year in which you purchased the electric car.
To receive the maximum tax credit, you’ll need to purchase a new electric car. Used cars are not eligible for the program. However, new cars are considerably more expensive, even with the applied tax credit.
More Car Buying Tips
If a new electric car isn’t in your budget, you can always purchase a used car. Carvana is our top choice for buying used cars online. They have thousands of cars (electric and fuel-powered) that you can browse through. You can read more about the Carvana car-buying process here. But keep in mind that you won’t be allowed to apply for the tax incentive.
There are many pros to buying an electric car. Not only do they cost less to maintain, but they’re also good for the planet! Plus, the tax incentives for used cars can also help justify the expensive upfront costs while purchasing a new model. It’s just one of the many reasons to purchase an EV for yourself today!
