Like other automakers, Volvo is steadily going green with hybrid and all-electric vehicles. In fact, Volvo created a new company, Polestar, to roll out hybrids and EVs, such as the Polestar 2. It also recently debuted the Recharge lineup of EVs. And thanks to these efforts, consumers can get $7,500 back when they buy certain Volvo models.
Some automakers, including Volvo, sell cars eligible for the federal EV tax credit
Some Volvo customers can get up to $7,500 back thanks to the federal tax credit for electric vehicles and plug-in electric vehicles. It’s commonly known as the federal EV tax credit. The federal government uses a formula based on the size of the car’s battery pack to determine the size of the tax credit. As such, all-electric vehicles qualify for the maximum amount, while it’s a bit different for PHEVs.
There’s also a sales limit, too. Automakers such as Tesla and General Motors have already sold the 200,000 eligible units under the law. So consumers who purchase Tesla and GM PHEVs and EVs can no longer take advantage of this tax credit.
And though the government may expand the tax credit, Volvo customers are on the clock. The more PHEVs and EVs that Volvo sells, the closer it comes to selling the 200,000-unit limit.
The Volvo models that qualify for the tax credit
Luckily, quite a few Volvo models qualify for the federal tax credit. That said, not all can get up to $7,500 off, but they can still get a big discount. For example, the XC40 Recharge, Polestar 1, and Polestar 2 are eligible for the maximum $7,500 tax credit. That’s because the XC40 Recharge and Polestar 2 are EVs, while the Polestar 1 is a PHEV with a big battery pack, Electrek reports.
Other Volvo models, though PHEVs, don’t have a large enough battery pack to hit the max $7,500 credit. For example, the 2021 S60, S90, V60, XC60, and XC90 qualify for a $5,419 tax credit.
With that being said, older years of those models will be eligible as well. But they may be eligible for a smaller amount. However, Volvo customers might not want to shop for an older model anyway. According to Electrek, the tax credit can be used only by the original owner. So used Volvos don’t qualify for this tax credit.
How can you take advantage of the EV tax credit?
Another caveat, however, lies in the fact that it’s a tax credit, not a rebate or a discount. In particular, this means two things: Customers will need to claim this credit when they do their taxes. Consumers should consult with a professional for advice on how to do this.
The other caveat is how tax credits work. They reduce how much money you owe the government in taxes, but you won’t get the leftovers. For example, if you buy a new Volvo XC40 Recharge, you’ll be eligible for a $7,500 tax credit. But if you only owe the government $5,000 in taxes, the EV tax credit will negate that amount. However, you won’t get the remaining $2,500. You also won’t be able to use that remainder for the following tax year.
All this means that, although consumers can save thousands of dollars, the EV tax credit isn’t like a discount at a grocery store.