GreenCars 101

Financial Benefits of EV Incentives

Dave Nichols
Jan 2024
Driving an electric vehicle doesn't have to be expensive. In fact, many financial benefits exist in the form of EV incentives that make the cost of a new electric vehicle more affordable. Here's what you need to know before you buy.
Man and woman sitting at a desk looking at a computer sorting through files

Financial Benefits of EV Incentives

New plug-in hybrid and all-electric vehicles are expensive. Luckily, there are many incentives when purchasing a new EV and they can mean big savings for you. The federal tax credit alone could allow you to get up to $7,500. State incentives could get you another $2,500. That’s ten grand off the cost of your new EV!

As you may be aware, the federal government in the United States gives you tax credit when you purchase a plug-in hybrid or all-electric car. Dealers can now can take up to $7,500 off the cost of the vehicle just from this one tax credit alone. There are state and local incentives and rebates that you can add to your savings. However, how much you can get from the feds depends on a number of variables. To find out which specific incentives and dollar amounts you qualify for on an electric vehicle, check out our EV Incentives Tool right here on GreenCars.

People are happily looking over paperwork

Things to Know about EV Incentives

In August 2022, Congress passed new legislation – the Inflation Reduction Act of 2022 – which changes credit amounts and eligibility requirements for clean energy vehicles, including electric vehicles and plug-in hybrids.

Up to $7,500 is available for new electric vehicles, and there is now a credit of up to $4,000 for used electric vehicles, which can make buying an EV even more affordable for some drivers. However, price caps are in place: passenger cars priced at over $55,000 and vans, trucks, and SUVs priced at over $80,000 are no longer eligible for credits.

Only vehicles whose final assembly is completed in North America qualify for credits. Many vehicles that previously qualified for clean energy incentives are no longer eligible. Not only do vehicles have to be assembled in North America, but they must meet new critical mineral and battery component requirements for a credit of:

  • $3,750 if the vehicle meets the critical minerals requirement only
  • $3,750 if the vehicle meets the battery components requirement only
  • $7,500 if the vehicle meets both

A vehicle that doesn't meet either requirement will not be eligible for a credit – at least if you finance or purchase it outright. If you lease, you may still be able to obtain the $7,500 credit from your dealer.

You can look up the most current list of vehicles on the GreenCars EV Incentive Tool.

Woman looking over tablet with a car salesperson

The Details

Other conditions you should know about the federal tax credit for EVs is that it is not available to an electric vehicle that is being purchased strictly for resale. The vehicle must be primarily used in the United States. Plug-in and all-electric vehicles must be built by qualified manufacturers and the EV tax credit cannot be passed on to a secondary buyer. The vehicle must have battery packs that are rated for at least 4-kHw of energy storage and must be capable of being recharged from an external source. And lastly, the IRS reserves the right to reject a claim for an EV tax credit because, well… they are the IRS.

There are also dozens of state and regional incentives for plug-in hybrid and all-electric vehicles. Many states have at least a dozen programs, though many only apply to businesses that are going green. Some credits include exemptions from fees and inspections, or for carpool lane access, free parking, reduced vehicle taxes and lower registration fees.

California is leading the country in EV acceptance. For anyone buying or leasing a new EV, the Clean Fuel Reward may also be available under California’s Clean Fuel Reward program. Even Hydrogen Fuel Cell vehicles qualify for incentive in some states.

Keep in mind that the EV Incentives landscape is ever-changing. To find out which of the latest specific EV incentives you qualify for on a particular vehicle, visit our EV Incentives Tool.

A young couple admiring the forest and trees next to their RAV4 Hybrid

Join the sustainable transportation evolution.

Subscribe to receive the latest GreenCars news, products, and updates

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.