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How Does the Federal Tax Credit for Electric Cars Work?

2022 Chevrolet Bolt EUV on the beach

Looking for an electric vehicle in Oshkosh or Sheboygan? They’re all the rage these days, and for plenty of reasons. They’re more environmentally friendly than gasoline vehicles, for instance. They’re also often not nearly as expensive as you might think — especially if you can take advantage of federal tax credit money! While vehicle brands such as Tesla and GM are no longer eligible for these rebates, there are plenty of brands that are! Read on or contact us to learn more.

 

 

Here’s How the Tax Credit Works

So, how does it all work? The federal tax credit starts at a minimum of $2,500 and can go up to $7,500, depending on the car’s traction battery capacity and gross vehicle weight rating. Cars from automakers that have sold 200,000+ qualifying EVs are no longer eligible for the tax credit, so for GM EVs and Tesla EVs, there is, unfortunately, no available tax credit at this time.

Which Models are Applicable for this Electric Car Tax Credit?

You may be able to earn the federal EV tax credit when you buy a qualified new EV in West Bend after December 31, 2009 that meets these criteria:

  • Has a gross vehicle weight rating (GVWR) of up to 14,000 pounds
  • Meets specified emission standards
  • Has to be mostly driven in the United States
  • Draws propulsion using a traction battery that has at least 5 kilowatt-hours (kWh) of capacity
  • Uses an external source of energy to recharge the battery

You can also use this hehlpful tool for an approximation of your vehicle’s potential tax credit Note that if you’re considering a plug-in or battery EV, you will need to keep in mind that the model you’re interested in has to be built by qualified manufacturers in order to earn the maximum electric car tax credit of $7,500. They also need to have battery packs that are rated for at least 4 kWh of energy storage and can be recharged from an external source.

Am I Eligible for the Federal Electric Car Tax Credit?

Remember, the federal tax credit for electric cars in the U.S. is only available if you buy the vehicle. If you lease an EV in Beaver Dam instead, the tax credit will go to the lending institution instead as they technically own it!

The above having been said, you will also definitely want to think about how much you will owe in income tax for that year. *This amount is key because it caps how much of the tax credit you can get*:

  • For Instance: if you buy an electric model in Ripon eligible for the full $7,500 and you owe $3,000 in income tax, then you can only earn $3,000 of the credit.
  • Similarly, say if that model is only eligible for $1,500, then you will earn only $1,500 instead.

In other words, you can only earn the full amount if you owe at least $7,500 in income tax the year you bought your EV and the model has an eligible electric car tax credit for $7,500.

Remember also: You cannot pass on the tax credit to someone else even if you decide to sell your EV. Only the registered owner of an eligible model can claim this credit, so if you want to buy a used eV instead, you will not be able to retain this credit.

How Long Will the Federal Electric Car Tax Credit Be Available?

With a seemingly exponentially-increasing amount of electric models being released from more and more automakers, availability of/eligibility for the federal EV tax credit will begin slowing down in the coming years. Once a manufacturer has sold 200,000 eligible plug-in electric models or EVs, the credit will phase out after the second quarter. View the list of qualifying manufacturers from the IRS.

Save on a EV Today in Wisconsin

Now that you know the answer to “How does the federal tax credit for electric cars work?” want to see how much else you could save on your next new EV? Head to our online finance center now then value your trade.

 

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