Making EV Ownership More Affordable
EV tax credits can help making the switch to an electric car much more affordable but finding them and applying for them isn’t necessarily fast or easy. Resources like our own interactive GreenCars incentive tool can help you find which credits you are eligible for, but you still need to find the right forms to fill out – and often have to wait to actually get your money back.
That’s especially true of the $7,500 federal tax incentive, which can give EV buyers huge savings – but you apply for it at tax time, which can be long after you actually purchase an electric car. Fortunately, in 2024, that’s set to change.
$7,500 Credit Applied Immediately
Next year, instead of purchasing an EV, obtaining the necessary documentation from your dealer, and then applying for the IRS section 30D tax credit when you file your return, your dealer will be able to apply the $7,500 credit at the time of sale. Essentially, you will transfer the credit to the dealer of your choice for the vehicle you are purchasing, and the dealer can apply the credit directly to the price of the vehicle.
That means you see the savings immediately as a reduction of the purchase price of the car – making your total outlay lower or lowering your monthly payments. You will no longer have to wait months to receive your money back from the government. For some buyers, the new process means that their money can be freed up for other uses, and for those on tighter budgets or cash flow, EVs become even more accessible.
Things are easier for the dealer as well – instead of having to explain to customers how to get the tax credit (and having to support those customers through the process), they can register on the IRS website, apply the credit to the price of the vehicle, and get the money back from the government within a few days.
Income Restrictions Apply
Of course, all of the existing conditions for the federal tax credits still apply. For those purchasing an EV, there are income limits in place for the $7,500 new car tax credit:
- $300,000 “modified adjusted gross income” for married couples filing a joint tax return
- $225,000 for heads of household
- $150,000 for single tax filers
New vehicles also need a certain percentage of local content and local battery manufacturing to qualify. You can research vehicle incentives using the GreenCars Incentive Tool. Vehicles that don’t qualify for the $7,500 purchase incentive may qualify if you lease them; speak to your dealer for details.
$4,000 Used EV Tax Credit
Keep in mind that there is also up to $4,000 available for purchasers of used electric vehicles. There are no requirements around local manufacturing or battery content, but there are income limits:
- $150,000 for married couples filing a joint tax return
- $112,500 for heads of household
- $75,000 for single tax filers
It is the buyer’s responsibility to ensure that you meet the income requirements, and you have to file a tax return for the year you transfer the credit to the dealer and purchase the vehicle. Dealers are not responsible for checking your eligibility – but if you get the credit and you’re not eligible, you may have to pay the IRS back at tax time if it’s found you don’t qualify.