What is an Electric Vehicle Tax Credit and Are You Eligible for One?
The full tax credit is offered on the first 200,000 cars produced by a manufacturer. After then, the credit starts to expire. It progressively fades away, first to half of its original value, then to zero around a year after the 200,000th sale.
At the moment, two manufacturers have totally depleted their available credit — you will not be eligible for the incentive if you purchase any Tesla or General Motors vehicle, no matter how efficient.
Nissan is the next company in line to lose the ev tax credit, albeit as of this writing, owners of the 2021 Nissan Leaf are still eligible for the full amount.
Incentives from the State and Local Governments in Your Area
Though the federal government provides the majority of government EV subsidies, certain states and local governments have incentive schemes to assist new car purchasers afford a more efficient vehicle. Tax credits, rebates, reduced vehicle taxes, single-occupant carpool-lane access cards, and exemptions from registration or inspection costs are examples of these.
California provides the greatest assistance to EV customers. Residents may be eligible for up to $7,000 in state incentives under the Clean Vehicle Rebate Project.
Individual EV customers are not supported in Alaska, Alabama, or West Virginia, among other states. They do, however, provide certain initiatives to help firms pay the costs of seeking more fuel-efficient fleets.
The Department of Energy has an interactive list of state-level incentives, while Plug-In America has an interactive map showing EV car tax credits.
Your Electric Company Might Be Able to Assist
Finally, it is not just governments that may assist you with the purchase of a new EV. Some local electric utilities provide EV car tax credits to encourage people to purchase electric cars (after all, they profit when you convert your petrol expenditures into power dollars).
These may be as substantial as a refund. For example, the Omaha Public Power District gives a $2,500 incentive to clients who buy a new EV plus a home charging station. They might even be as simple as reduced power tariffs for charging an EV outside of peak hours.
Should I take action right now or wait?
The present government policy is extensive, and there are several low-cost EVs on the market from manufacturers that have big banks of these credits to distribute. If you want to make the switch to an EV or a plug-in hybrid, you should do it sooner rather than later.
However, if you have your heart set on a Tesla or GM's forthcoming Hummer EV or Cadillac Lyriq, all of which will be available next year, it wouldn't hurt to wait and see whether the EV tax cuts are reinstated in Congress.
Part of the idea that was shelved would have increased the manufacturer's sunset total to 600,000 cars, which would have brought GM and Tesla vehicles back into qualifying area. The same idea would provide a $2,500 incentive for purchasing secondhand EVs.
Another component of the concept would be to apply the whole tax credit for EV car at the point of sale. This modification would allow customers to use it as a reduction on the car's purchase price rather of waiting until the following tax season to claim it as a deduction.
While EV sales are increasing at an exponential rate as a proportion of total sales, these cars account for roughly 4% of total sales. Two things will happen if manufacturers construct more EVs than the market demands. Prices will fall, and there will be growing demand for further government incentives to encourage the sale of electric vehicles. You win in either case.