Tax credits and rebates for buying an electric car

Lower your tax bill while working to reduce your carbon footprint.

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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.

Compare hybrid vs. electric cars

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.

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.

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