With global warming on the rise countries around the world are attempting to go carbon neutral to help mitigate the consequences to come.
In order to help, the US Federal government is offering a Tax Credit with the purchase of qualified electric vehicles.
How much is the electric vehicle tax credit?
One can receive a nonrefundable tax credit up to $7,500 on qualified electric vehicles. A nonrefundable tax credit is only able to reduce your annual federal tax liability and not create a tax refund. This means if someone owes $5,000 in federal income tax, and they purchased a qualifying electric vehicle, they will receive a tax credit of $7,500 but only be able to apply $5,000 for the year.
What vehicles qualify for the tax credit?
The tax credit only applies to new electric vehicles and some plug-in hybrids. With the increase demand for electric vehicles the tax credit may go away soon. Once a manufacturer sells over 200,000 qualified vehicles, they no longer qualify for the tax credit. For example, Tesla and Chevrolet have both reached this threshold and no longer have the tax credit. See the attached link for the full list of qualified vehicles: https://www.fueleconomy.gov/feg/taxevb.shtml
Are there other tax benefits to purchasing an Electric Vehicle?
Some states offer their own tax incentives to purchase an electric vehicle. Washington has a sales tax exemption on the purchase of new and used electric vehicles. New vehicles cannot exceed the purchase price of $45,000 and used vehicles have to be under $30,000. Below is a chart of the tax exemption:
See the attached link for tax credits for other states: https://evcharging.enelx.com/resources/federal-and-state-electric-vehicle-incentives
Should I purchase an electric vehicle?
If someone is in the market for a vehicle, buying an EV could potentially be a great choice. With the tax incentives set aside, there is still the long-term benefit of not having to purchase gas. In addition, one can give themselves a pat on the back for doing their part in creating a cleaner environment.