By far the biggest way to save in the near term on an EV is to find one that qualifies for government incentives. For years, buyers have been taking advantage of these credits come tax season. To make sure you and your ideal EV qualify for the federal tax credit (up to $7,500), check:
Income.Adjusted gross income below $150,000 for single filers; $225,000 for those filing as head of household; and $300,000 for joint filers.
Vehicle cost.For SUVs, vans, and pickups, the listing price (or MSRP) must be under $80,000 and, for other vehicles, under $55,000. Be sure to confirm what type of vehicle your prospective EV qualifies as. What’s considered to be an SUV in this country can often be … surprising.
Assembly.Your EV’s final assembly must take place in North America.
Note that, with the passage of the Inflation Reduction Act, some important new changes came into effect in 2023 that effectively split the credit into two equal halves:
Battery.To be eligible for the first $3,750, your EV’s battery components must be manufactured or assembled in North America.
Materials.To qualify for the second half, the critical minerals used to build your vehicle (again, we’re talking mainly the battery here) must have been extracted or processed in the U.S. or countries with whom we have a free-trade agreement. You can also qualify if those critical minerals were recycled somewhere in North America.
The IRS keeps a list of vehicles that currently qualify for the tax credit, along with those carmakers that expect to become “qualified manufacturers” soon. If you’re interested in local rebates, sites like Kelly Blue Book and Electrek offer a state-by-state breakdown, too.
Starting this year, certain used plug-in hybrid and battery electric vehicles will also qualify for a tax credit of up to $4,000 or 30 percent of the price of the car, whichever is less. As with the new EV credits, there are certain requirements:
Income. For single filers, it’s under $75,000. Head of household is $112,500. And the joint filer limit is $150,000.
Vehicle Age.The used EV must be at least two years old (based on when you’re purchasing it) and cost less than $25,000.
Dealership.It must be sold by a dealer. Private-party sales won’t count.
Also worth noting: The credit can be applied only once per vehicle.
Here’s something to look forward to. Starting next year (2024), a new option to apply the $7,500 credit at the point of sale will go into effect. Basically, you get to immediately take that discount at the dealership instead of waiting until the following year when you file your taxes. If that helps you afford the perfect EV, then it could be worth the wait!
But whether you buy this year or in years to come, make sure to double-check the latest before you buy: You won’t want to miss out on any credits you (perhaps newly) qualify for!
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