The growing popularity of electric vehicles (EVs) has automakers, dealerships, and state governments racing to offer incentives to increase EV sales. Most notably is the federal tax credit for EVs that was put into effect by Congress in 2012.
Prior to this incentive, buyers had to purchase an expensive new car to qualify for a tax break. With the introduction of the $7,500 tax credit, anyone could buy an EV and still receive some help paying for it.
Since then, there have been several changes to the tax credit, making it more lucrative for individuals. Some people even go as far to say that it is no longer need because electricity costs are decreasing at a steady pace.
However, one major downfall of the tax credit is that it only applies to cars that get less than 150 miles per hour. This effectively limits how fast most people can travel in their vehicle. Something that many need or want.
Tax Credit Elimination
There is also discussion about eliminating the tax credit completely in the future. Many believe that giving people money back on their taxes is not sustainable long term. More people will take advantage of the credit, creating a situation where no one receives any benefits from it.
This article will discuss what experts think about the current state of the electric vehicle tax credit in the USA. Why it is important, and strategies to use when buying an EV. It will also look at potential ways that there will be tax credit elimination in the future.
History of the Electric Vehicle Tax Credit
The federal government first offered an incentive to people who wanted to buy or lease an electric car back in 2008. Called the Advanced Technology Vehicles (ATV) Loan Program. Department of Treasury administered it and lasted two years.
In that time, Chevrolet sponsored the program and gave out $2,500 to buyers of any model year 2016 Chevy Volt. That’s right! You could get a fully functional all-electric car with fuel cell backup for just under $3,000. General Motors (www.gm.com) discontinued its sponsorship of the loan program after only one season. But Congress continued offering incentives through other programs. These days, there are three separate tax credits available to help finance the purchase of a new electric car. They each apply to different types of vehicles. Below is all what you need to know about them.
History of the EV Tax Credit – Who gets Paid How much?
The most generous tax break is given to customers who purchase a zero-emission vehicle (ZEV). A ZEV is defined as a battery powered passenger vehicle that doesn’t produce more than 0.4 g/km of CO 2 emissions. This includes pure EVs like the Nissan Leaf and plug-in hybrids such as the Hyundai IONIQ.
Zero emission cars qualify for a rebate of up to $7,500 per individual ($15,000 per couple). Plus, an additional amount depending on their size.
Who is Eligible for an Electric Vehicle Tax Credit?
The IRS establishes some guidelines to determine if you are able to claim this tax deduction. To be sure of your eligibility, make sure to have all the required documents at hand before filing.
The first thing they will look at is whether you are going from one place to another. If you are traveling for business or for personal reasons, then this is okay. But if you just want to save money by spending less on travel, then this may not apply to you.
If you do satisfy this criterion, then you still need to know how much electricity your car uses per mile. Cars that use around 1 kilowatt-per-hour (kWh) of energy per mile traveled. They can get a higher tax credit than cars that use more than that.
This article will talk about what is allowed and what is not when it comes to using the tax credit.
How much is the Electric Vehicle Tax Credit?
The federal government offers several different incentives to help you buy or lease an electric car. One of these is the $7,500 annual income limit for deducting it from your taxes. This comes off your taxable income. So, if you make more than that then you can’t claim this as a deduction.
If you do not meet the eligibility requirements mentioned above. There is still something we can do for you. We can assist you in finding another way to receive our generous tax credits by talking with you about other ways to incentivize the purchase of an EV.
We will assess whether there are additional state level rewards or benefits for owning an electric car and how best to help you achieve your goal of switching to an EV. It’s important to remember that though the expiry of national incentive program However, most states are continuing to offer their own rebate programs.
How can I get an Electric Vehicle Tax credit if I already own an Electric Vehicle?
Yes, you can. The IRS offers special incentives for those who currently have an EV and would like to purchase or upgrade to a new EV. These incentive programs are not limited to only buying a new car but can include things such as paying off debt or purchasing a house with subsidies.
Most people know about the federal income tax deduction for those who purchase a new EV. However, there is another tax credit available to additional funding of your state’s rebate program. This second tax credit comes from your local government and reimburses them for the money they paid to buy an EV.
What happens after I submit my Tax Return?
Once you are eligible for the credit. Considering your car as a new for tax purposes and thus gets a higher amount of depreciation. You can also apply the credit to past years if you were able to add it to your monthly budget.
To claim the full electric vehicle credit, you must do something called “time tracking”. This means recording when and how much time you spent using your EV as an automobile. Time tracking forms include ones that ask about activity during work hours or around the house, etc. Some people even keep track of how many miles they drove in their EV so that they can account for this in their time log.
There is some leeway given to individuals in whether they choose to time-track their cars or not. But most experts agree that it must be done to get the whole credit.
What if I make a Tax Payment?
When you are due a credit, make sure to also include it when paying your taxes. Most states offer an additional tax break for those who pay for their vehicle using cash instead of debt. This is typically referred to as the “cash exemption” or sometimes the “car ownership deduction.”
Most States Give You an Exemption for the Money That You Paid to Own Your Car. Including it easily in your income and therefore deducted from your overall taxable income. Many people choose to use this benefit before claiming their electric car tax credit.
Can I get an Electric Vehicle Tax Credit if I Owe Taxes
There is no rule that says you must be current with your income before you can claim the EV credit, but it makes sense to be.
If you can prove that you own an eligible vehicle and that you will not be receiving any form of income (for example, being laid off or having a lower paying job), then you should be able to access the credit.
However, just because you pay less than $2,000 per year in income does NOT mean that you cannot receive the credit. The IRS sets a low threshold for this so only people who make very little money qualify out-of-pocket.
What if I get a refund Tax Credit?
As we have mentioned before, most states offer some type of tax credit or discount for individuals who purchase an electric vehicle. These are typically referred to as EV credits or incentives.
Some states give discounts because of consumption of the fuel while driving the car. Others are due to the emissions producing while driving, and some both. Most state tax agencies calculate this incentive using either a per-vehicle basis or per-driver basis.
Per-Vehicle Basis
On a per-vehicle basis, each individual owner of the vehicle receives their own tax break. The calculation of this is by comparing the cost of owning a vehicle with the average income of the area. The difference in costs is then subtracting from the average monthly income to determine how much money you save by owning a green car.
Most people know about the federal government’s tax breaks for buying an electric vehicle. But what many don’t realize is that there are also state level benefits. Not only do these taxes apply directly to your personal finances, but they can help you earn back the initial investment in the car.
This article will go into more detail about all the different types of EV tax breaks across America, along with some helpful tips on claiming them. Further more incredible information related to EVs is available at vehicles ambassador