Buying an electric vehicle could be a very smart decision right now. Electric vehicle incentives are the icing on the cake, and all in all, they could help you save (or recoup) thousands of dollars post-purchase. There are various federal, state, and local incentives to help buyers afford the vehicle they want. These include tax credits, rebates and other offers for electric vehicles. What is the difference between these incentives? We’ll take a look.
EV tax credits
Let’s look at tax credits first. Federal and state electric vehicle tax credits can be helpful, but there are limits, and the money you might recoup doesn’t come right away. If you’re counting on electric car tax credits to lower the cost of the Tesla, Nissan LEAF, or Hyundai Kona you want to buy, don’t. You won’t see any of that money until the following year’s tax return.
Electric vehicles like the Lucid Air are eligible (or should soon be eligible) for federal tax credits because they are fully electric. Plug-in hybrid electric vehicles like the Volvo S60 PHEV qualify, but not for the full $7,500. And, even if the car is eligible for the full amount, you may not be. There are discussions about whether tax credits only benefit the wealthy, as they may not be very helpful for those earning less than $60,000.
Are EV tax credits different from deductions? Yes, a deduction reduces your taxable income. Deducting the purchase price of an electric vehicle will probably only work if you are buying the electric car for business purposes. A tax credit is a specific amount of money added to your tax return.
How to claim your EV tax credit? You’re in luck, we have a step-by-step guide on this.
Next, let’s look at EV discounts. A rebate is the fastest way to reduce the cost of an electric vehicle or to recover money after your purchase. As a rule, a discount occurs after the sale – part of the total cost of the electric vehicle is returned to you after completing certain documents.
Currently, there are no federal electric vehicle rebates available. State discounts vary by location. For example, California is generally known for offering good discounts on electric vehicles to buyers, and Texas offers a $2,500 discount for buying an electric car. However, many states do not offer any type of statewide rebate for all-electric or plug-in electric vehicles.
Dealerships often offer discounts on electric cars, so check local deals. Private discount offers may also be available to you from businesses in your area.
How to claim your EV rebate? Contact the company offering the rebate for assistance or ask the dealership where you are buying the electric vehicle.
National and local incentives for electric vehicles
What are the incentives for electric cars? ElectricForAll has a handy search tool. You can enter your zip code and see all current state and federal incentives, including rebates and tax credits. You can also find laws and incentives online at afdc.energy.gov.
Incentives vary depending on where you live. For example, in my home state of Vermont, state incentives (tax credits) are offered for electrified vehicles. Plug-in hybrid electric vehicles are eligible for a $3,000 tax credit only for individuals earning $50,000 or less or married couples earning $75,000 or less. All-electric cars are eligible for a $4,000 tax credit for the same group. Buyers earning more will qualify for a slightly lower credit, and buyers earning more than $100,000 ($125,000 for a married couple) don’t appear to be eligible for state tax incentives at all.
In my state, private companies offer rebates, mainly electric companies.
Are the incentives for electric vehicles worth it in 2022?
This is a tricky question to answer as it can vary by brand. New General Motors cars (Cadillac and Chevrolet) and new Tesla electric vehicles no longer qualify for the federal electric vehicle tax credit. Toyota is about to reach its electric vehicle tax credit limit, and cars sold after that date will only be eligible for a percentage of the original credit for six months to a year.
If you earn a certain amount and don’t want to buy a Tesla, Cadillac, Chevy, or Toyota EV, the federal incentives are probably worth it. If your state offers rebates, this is one of the best ways to save on overall EV costs.
You can also consider renting an electric car. Dealerships are more likely to be able to claim the full federal electric vehicle tax credit, which often results in a lower lease payment for you. Dealers are also more likely to know all the ins and outs and tips and tricks for applying and qualifying for EV incentives.
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