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Forbes Wheels EV Tax Credit Calculator

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EVs cost more than comparable-size gasoline-engine vehicles. Tax credits and other benefits reduce the price difference and induce car shoppers to consider lower-pollution electric vehicles and plug-in hybrids. 

Knowing how much money you get back from federal and some state governments when you buy an electrified vehicle helps you make an informed decision. Our EV Tax Credit Calculator can help you understand the benefits. 

EV Tax
Credit Calculator

Calculate Your Credit on Buying a New EV or Plug-In

See how much you could get back buying a new EV or plug-in hybrid.

Federal EV tax credits of $2,500-$7,500 are available for new EVs and plug-in hybrids but not for hybrids. The credit applies to the year you buy the vehicle and your tax credit is capped at how much you owe the year you buy the car. If you lease, the credit goes the the title-holder of the car, and some or most of the credit is used to reduce the monthly payments. Only the first buyer gets the credit.

Tax Credits Explained

When you buy an electrified vehicle—battery electric vehicle (BEV) or plug-in hybrid electric vehicle (PHEV)—most people are entitled to a credit on your federal taxes of $2,500 to $7,500. In addition, about 20 states offer credits or rebates plus intangible benefits such as free charging, free municipal poking, lower highway tolls or single-occupant access to high-occupant vehicle (HOV) highway lanes. 

There are exceptions, explained in the FAQs below. You have to buy not lease a vehicle although there are ways to collect while leasing, you have to be the very first person to buy (title and register) the vehicle and under current rules General Motors and Toyota/Lexus vehicles aren’t covered because they passed the current cap of 200,000 vehicles eligible for rebates. 

Since they’re tax credits, you have to owe as much in taxes—meaning your total taxes for the year, not the remainder you might owe April 15—as you’ll get in tax credits. That may seem unfair but then if you can afford a $50,000 EV and you’ve managed to have a total tax liability of less than $7,500, not many people will feel sorry for you. 

The rules may change if the Biden Administration’s infrastructure bill passes with up to $12,500 in credits, as currently envisioned. The max credit requires the car to be U.S.-made, cost less than $80,000 and be built in a union factory. This last part may cost the administration the support of legislators in new South states that have been the site of most new auto plants the last 25 years, all non-union.

EV Tax Calculator FAQs

Is this a tax credit, a tax deduction or an immediate rebate? How much? 

The federal program is a tax credit against what you owed the year you bought the vehicle. The amount is somewhere between $2,500 and $7,500, based on the size of the battery. Every EV has a battery big enough to quality for a $7,500 credit. 

My taxes are less than the credit for the EV I just bought. Can I get the balance in the following year?

Nice try, but no. For individual buyers, the tax credit only offsets taxes in the calendar year you bought the vehicle. 

Does the tax credit apply to used vehicles? What if the first owner never applied for the tax credit? 

No, it’s for new vehicles only, and applies only to the first buyer. But the selling price, used, should reflect, more or less, that the effective purchase price was $7,500 less than the sticker price. 

Does the EV tax credit benefit me if I lease an EV? 

No, not directly. The tax credit goes to the first buyer of the vehicle, which for leases is typically the leasing company or its financial partner. But you should expect to get back most, if not all, of the up-to-$7,500 in the form of lower lease payments. On a typical 36-month lease, the payments could be up to $208.33 lower ($7,500 divided by 36). Ask the sales rep or finance & insurance person to show you how much is applied. 

Are there cases where I should lease not buy? 

If you buy a car in the U.S. but owe less than $7,500 in U.S. taxes–that calls for an income of about $53,000–then you might consider leasing. The seller should work some/most of the credit into a lower monthly rate. 

Do I get the credit if I buy a dealer demo or service loaner EV with hardly any miles on it?  

That depends. IRS rules say that to get the EV credit, “The original use of the vehicle began with you.” Ask the dealer: Has the car been registered/titled? On the sale documents, will it be marked as new or used? If the dealer says the vehicle is eligible for the tax credit, ask for a note to that effect, just in case.  

How is the tax credit calculated? 

You really want to know? As long as the battery is more than 4 kilowatt hours (kWh), which leaves out hybrids, you’re entitled to $417 for any battery pack, plus $2,500 for a minimum 5 kWh pack, plus $417 per kilowatt-hour over 5 kWh (calculate battery size to the tenth of a kilowatt-hour). So a 10-kWh battery would get $2,500 plus $417 plus 5 times $417 ($2,085) or $5,002. You’re entitled to the full credit if the vehicle has at least a 16.0-kWh battery. Shortcut way to calculate the tax credit: If it’s a full electric vehicle, the battery is always big enough to qualify for the full $7,500 credit. 

How do I apply for the tax credit? 

File federal form 8396 with your taxes. 

Are electric two-wheelers covered? 

Yes, if: They can reach 45 mph, are driven by an electric motor with a battery of at least 2.5 kilowatt hours, can be recharged from an external electrical source and (this may be the fed’s shot at humor:) weigh less than 14,000 pounds. The credit is easy to calculate: 10% of the price, max credit $2,500. Electric mopeds wouldn’t be covered (not fast enough, battery less than 2 kWh). It’s currently in effect through December 2021. 

Can small businesses get the EV credit? 

Any business can get the tax credit and it can be spread out over more than the current tax year. Talk to your tax advisor. 

Can I get tax credits for more than one EV? 

Yes. But if you buy more than one EV in a tax year, the total of your credits is capped at your total tax liability for the year. 

Is there a tax credit for hybrids? 

Not in the last decade. There was, from 2006 through the end of 2010, an available tax credit of up to $3,400. Hybrids have batteries of 1-2 kWh, making them too small to qualify for the current plug-in hybrid / EV credit that requires at least a 4-kWh battery. 

What about state tax credits? 

Some states have credits, or rebates, for buying EVs or plug-ins. The better credits and benefits are generally in the CARB states that following the stricter car emissions standards laid down by the California Air Resources Board (CARB): California, Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, Washington state and Washington D.C. About 20 states have credits or rebates for EVs and plug-ins. 

Can I get a credit if I install an EV charger? 

Yes. A federal tax credit is available for 30% of the cost of the charger and installation, up to a $1,000 credit, means $3,000 spent. As a rough rule of thumb, figure $500 for the charger (roughly) and $500-$1000 (very roughly) for installation. For a $500 charger and $750 install, total $1,250, you’d get a federal credit of $375. 

Are there other benefits to buying an EV? 

States and municipalities may offer you access to HOV (high-occupancy vehicle) lanes with only the driver aboard, free municipal parking, free charging at some state or local sites and lower electricity rates at home. It may vary be county, township or electricity provider. 

Is every EV entitled to a tax credit? 

The current tax credit applies to the cars from automakers that haven’t yet sold 200,000 EVs. So far that’s Tesla and General Motors. No other automaker is likely to hit the 200,00-unit cap for a while. And the infrastructure bill would offer a reset restoring tax credits to GM and Tesla, at least for EVs they build in the U.S. 

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