Electric Vehicles: What is the Federal Tax Credit?
Are you interested in purchasing an electric vehicle because of the federal tax credit? There are different kinds of rebates that vary from state to state and manufacturer to manufacturer. However, companies like Tesla have exceeded the rebate allotment and no longer qualify.
What is the federal tax credit for electric vehicles?
According to the U.S. Department of Energy, “cars purchased new in or after 2010 may be eligible for a federal income tax credit of up to $7,500.” Not everyone will get $7,5000. The credit will be based on a few stipulations, like the battery capacity.
In addition to the federal tax credit, many states will have other monetary incentives. You can check your state’s available credits through the U.S. Department of Energy State Laws and Incentives page.
Kissimmee, Florida, has an All-Electric Vehicle (EV) and Electric Vehicle Supply Equipment (EVSE) rebate for those who purchase an electric car and install a charger at home. In other words, the charger must be installed by a licensed electrical contractor and must meet a few other requirements.
You can check how much your vehicle is eligible for on the website noted above. It should be noted that most Tesla cars purchased after December 31, 2019, do not qualify for the rebate. Moreover, some vehicles from Cadillac and Chevrolet do not qualify due to the production numbers.
How do I claim the $7,500 electric vehicle tax credit?
There are various forms to fill out if you want to claim the electric vehicle tax credit. Form 8936 from the IRS is called the Qualified Plug-in Electric Drive Motor Vehicle Credit. For personal use EVs, you note your purchase on the 1040 form, U.S. Individual Income Tax Return.
There is a phaseout of rebates after the vehicle manufacturer sells 200,000 vehicles. This count started in 2010. Therefore, many vehicles have already reached the threshold. After that, the rebate disappears.
In other words, not all EVs will be eligible for rebates. The Department of Energy link above lists all of the cars and current eligibility.
The federal tax credit is also not a check you will receive in the mail. If you owe $6,000 on your taxes for the year, but you purchase a vehicle with a rebate of the full $7,500. You will not get a check back for the other $1,500.
What are the requirements for the EV rebate?
For a rebate by the manufacturer, there are a few stipulations. The vehicle must be made by a manufacturer and cannot be a car converted to electric. Similarly, it has to meet the Clean Air Act requirements and must not weigh more than 14,000 pounds.
The electric motor must draw from a battery with more than four kilowatt-hours. For instance, it must be able to recharge from an external source.
The electric vehicle must be purchased new and must be used by the taxpayer. Similarly, you cannot get the rebate if you lease the vehicle or buy it from another party. Also, the electric car must be used in the U.S. and has to be placed in service after 2010.