Perhaps you were one of the 3 million new EV (Electric Vehicle) owners on the road in 2020, or maybe you’re considering an EV purchase of your own. 

Whatever the case, it’s never been a better time to purchase an electric vehicle. And with the Biden Administration’s recent announcement of $100 billion in EV consumer rebates, this could mean even more dollars for EV owners. 

As an installer of EV charging stations around the Bay Area, we at WBE get asked a lot about these incentives. 

So we put together a guide to help you better understand electric vehicle tax credits and government incentives an EV purchase could offer. 

We’ll cover:  

• How much you can expect to receive from an incentive 
• The EV models that qualify
• Tax incentives for Tesla owners
• Who is eligible for a tax credit
• State and local electric vehicle incentives where you live 
• How to obtain the tax credit for your EV

How much is the EV tax credit?

The current federal electric vehicle tax credit is worth up to $7,500 in the year of purchase. However, there are a number of factors you should be aware of.

All-electric vehicles typically qualify for the full amount, while plug-in hybrid models have rebates ranging from $4,500 to $7,500. For example, the hybrid Toyota Prius Prime has a rebate of $4,502, while the fully electric Nissan Leaf has a rebate of $7,500. 

Consider your own tax bill. Something to keep in mind:  if your tax bill is not over $7,500 at the end of the year, you will not qualify for the entire rebate. For example, if you owe $5,000 in taxes, and the rebate for the vehicle is $7,500, your rebate will be $5,000. In other words, you won’t be eligible to receive the remaining $2,500.

What electric vehicles qualify for a tax credit?

Currently, there is a threshold of 200,000 cars per automaker. Which means, Tesla and General Motors, do not qualify for any tax credits.  

But that could change. If Congress approves the proposed bill, this could open up tax credit opportunities for owners of popular EVs, increasing the number of vehicles eligible to 600,000 and even offering up to $2,500 for used vehicles.

The good news is there are still nearly 50 different EV/PHEV models on the market available from around 20 manufacturers that qualify for some level of rebate. Here are a few examples, along with their current rebates:

Visit fueleconomy.gov for the complete list: Federal Tax Credits for All-Electric and Plug-in Hybrid Vehicles (fueleconomy.gov)

Tax incentives for Tesla Buyers

Tesla used up its federal quota for tax breaks in 2019 when it exceeded 200,000 in car sales. But, as mentioned, the new tax incentives could change this. 

In the meantime, do not let that deter you from considering these popular electric vehicles. In 2019, Tesla dropped the price on some models to compensate for the lack of rebate, and as we’ll mention in a few, there are other potential state and local incentives available. 

To learn more, check out Tesla’s database of resources by state to help calculate potential savings before committing to buy.

Who is eligible for EV tax credits?

Tax credits are available to  the original owner of a new electric vehicle. If you’re a subsequent owner of an electric vehicle – even if the original owner did not take advantage of the credit – unfortunately you won’t qualify.

Likewise, if you lease a vehicle, the manufacturer gets the credit, and it is up to them if they decide to factor this into the cost of the lease.

Some other fine print details to be aware of:

• The vehicle must primarily be used in the United States.
• The tax rebate cannot be used on vehicles that you immediately intend to resell.
• The vehicle must be made by a manufacturer.
• If your desired vehicle is not on the list, the manufacturer must provide requirements to qualify for the credits. This is not a guarantee of qualification.
• The vehicle must be an all-electric, plug-in hybrid, or fuel cell.
• Battery packs in the vehicles must be rated for at least 4 kWh of energy storage and must be capable of being recharged from an external source.
• The gross vehicle weight rating must be not more than 14,000 lbs.
• The IRS reserves the right to reject the tax credit.

Keep in mind that the tax credit is available only on your tax return. If you buy a vehicle in February of 2021, you will not realize this credit until you file taxes in 2022.

State and local incentives where you live

Some more good news for EV consumers. In addition to the federal incentives, you could also be eligible at a state and local level. These could be in the form of tax credits, rebates, reduced vehicle taxes, single-occupant carpool-lane access stickers, and exemptions from registration or inspection fees. 

California is the leader in these EV incentives. In certain districts, drivers can qualify for a $2,500 to $4,500 incentive to trade in their old vehicle for one with low emissions. Low-income households and those in disadvantaged communities are also eligible to receive extra subsidies. 

In addition, some cities and local electric utilities have incentive programs as well. These can help with charging costs, and the purchase of a home charging station. 

In California, PG&E offers an $800 Clean Fuel Rebate to offset charging costs. Various utilities across the country also offer similar discounted rates for residential charging during off-peak hours. 

Each state (and sometimes area of the state) is unique. Visit Plug-in America to find out which incentives are available in your area.

Other (non-financial) incentives

Many states offer additional non-financial incentives that you might find enticing.  Here are some examples:

• Exemptions from emissions testing
• Exemptions from parking fees, the ability to park free in carpool spaces, or even designated electric vehicle parking spaces with a permit obtained from the state.
• Several states allow the use of the HOV lanes even when driving alone. Do note, you will need to display a sticker or tag obtained from the state.
• New York drivers receive a discounted toll rate on all Port Authority of New York and New Jersey off-peak hour crossings.  
• New York also has a discount on their E-ZPass accounts, which saves on toll road charges.

How do you receive the credits?

The process to receive credits is fairly simple. In the year that you purchase or lease the vehicle, fill out and file IRS form 8936 (Qualified Plug-in Electric Drive Motor Vehicle Credit) along with your tax return. 

Electric vehicle purchased for business use? Fill out and file Form 3800, (General Business Credit). These are non-refundable tax credits, as opposed to refundable tax credits, meaning that they will reduce your taxable income. And if you don’t owe taxes, you will not qualify for the credits. More info can be found on the IRS website.

Do your research

Purchasing an electric vehicle is a big decision, and it is important to do your own research to determine whether the credits available are incentive enough to take the plunge. Electric cars certainly can save you money at the pump, and the tax credits and local rebates are enticing. 

But be  sure to look at the costs of owning an electric vehicle vs owning one with a gasoline engine. If you are in the market for a new vehicle and electric cars are on your radar, it’s worth it to take a look at all of the financial advantages. 

If the new legislation passes, it could offer more opportunities for those on the fence; however, as electric vehicles become more mainstream, it is likely that the incentives will not last forever.

Let WBE be your one stop shop

With the popularity of electric vehicles continuing to rise, W. Bradley Electric, Inc. (WBE) is ready to plan and install EV charging stations. From conception to completion, WBE has expertise in all areas including electrical, telecommunications, network, security, and audio visual. Contact us today to find out how we can install EV charging stations for your business.