Tax credits and rebates for buying an electric car

Both the federal government and some states offer tax credits or rebates as an incentive to get more electric vehicles on the road. But how much you can save and what type of car you need to qualify varies depending on where you live.

What tax credits are available?

There are tax credits and rebates available at both the federal and state level to help reduce the cost of purchasing an electric vehicle. These typically apply to the purchase or lease of any new plug-in electric vehicle (PEV), which includes both battery-electric vehicles (BEVs) and plug-in hybrid vehicles (PHEVs).

Federal tax credits

The federal government offers a tax credit of up to $7,500 for the first registered owner of a PHEV or BEV. The amount you receive is determined by the battery size and electric range — which means BEVs generally receive the maximum amount and PHEVs qualify for lower credits.

Keep in mind that the actual applied tax credit will also depend on how much you owe on your taxes. For example, if you qualify for the full tax credit of $7,500 but only owe $7,000 on your taxes, you’ll only be able to claim a $7,000 tax credit. There’s no “cash back” if your owed taxes are less than the credit you receive.

And if you lease a green vehicle, the tax credit goes to the leasing company, not you. However, most companies factor this credit in to the price of your car, reducing your monthly payment or down payment.

For more information, you can check the US Department of Energy website to see a full list of PEVs that qualify for a tax credit and how much you could get back.

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State tax credits

Ten states offer tax credits or rebates for electric vehicles that work in tandem with the federal benefit — meaning you may be eligible for more than the $7,500 federal cap.

• California

  Through the Clean Vehicle Rebate Project (CVRP), California offers the following incentives for electric vehicles:

  • Up to $2,500 for the purchase or lease of BEVs
  • Up to $1,500 for the purchase or lease of PHEVs
  • Up to $900 for electric motorcycles and neighborhood electric vehicles (NEVs)

  California also offers additional incentives for low-income households — up to $2,000 for vehicles purchased or leased after November 1, 2016. There are also several county- and region-specific incentives and rebates that may be available to you, so check with your local government to see what you may be eligible for.

• Colorado

  Colorado offers a $5,000 income tax credit for the purchase of an electric vehicle and a $2,500 income tax credit for leasing one.

• Connecticut

  Connecticut offers a rebate between $500 and $3,000 for PHEVs and BEVs through the Connecticut Hydrogen and Electric Automobile Purchase Rebate (CHEAPR) Program.

• Delaware

  The Delaware Clean Vehicle Rebate Program offers up to $2,200 for the purchase or lease of a BEV or PHEV. You may also be eligible for a rebate of $1,100 if you convert an internal combustion engine (ICE) to an EV.

• Louisiana

  Louisiana offers a tax credit of 10% of the cost of an alternative fuel vehicle (AFV) — up to $2,500. You may also be eligible for a tax credit that covers up to 30% of the cost to convert a vehicle from a combustion engine to an electric engine.

• Maryland

  Maryland offers a tax credit of up to $3,000 for qualified PEV and fuel cell electric vehicle (FCEV) purchases.

• Massachusetts

  You may be eligible for a rebate of up to $1,500 for the purchase or lease of a PEV or fuel cell electric vehicle (FCEV) through the Massachusetts Offers Rebates for Electric Vehicles (MOR-EV) Program.

• New York

  New York offers a rebate of up to $2,000 for the purchase or lease of a PEV through the Drive Clean Rebate Program.

• Pennsylvania

  Pennsylvania’s Alternative Fuel Vehicle (AFV) Program offers rebates of up to $2,000 for qualified all-electric vehicles (EVs), PHEVs, natural gas vehicles (NGVs), fuel cell electric vehicles (FCEVs) and propane vehicles.

• Utah

  Utah residents may be eligible for a whopping $18,000 tax credit for the purchase of a 2019 heavy-duty alternative fuel vehicle (AFV) or $15,000 for a 2020 model. To qualify, at least 50% of your AFV’s miles must be driven in the state.

The tax credits and rebates listed above are current as of June 2019. However, state-based incentives are constantly being revised based on available funding and program duration. For more up-to-date information, you can check the National Conference of State Legislatures, Plug In America or the Alternative Fuels Data Center.

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Bottom line

The federal tax incentive for a new electric car can help reduce the overall cost of going green. But before you commit to your next ride, read our guide to buying green cars and learn more about car loans to make sure you can afford the switch.

Frequently asked questions

To learn even more about tax credits, read up on these answers to standard quesitons.

• How can I claim an electric car tax credit?

  To claim your federal tax credit, you’ll need to fill out IRS Form 8936 — the Qualified Plug-in Electric Drive Motor Vehicle Credit Form. If you bought your car for personal use, you should also report it on your tax return, IRS Form 1040.

• Is there an income limit for the federal electric vehicle tax credit?

  No — as of June 2019, there is no income limit for the federal electric vehicle tax credit.

• Will the federal tax credit expire?

  Yes, the federal tax credit will expire for a specific make and model after 200,000 vehicles are sold. However, since most manufacturers are nowhere near this number, you’ll likely still be eligible for a tax credit for years to come.