If you have purchased an electric car or plan to purchase it in the coming months, you may be able to recoup up to $ 7,500 in tax credits for 2021. The Plug-In Electric Drive Tax Credit, better known as the EV tax credit, first arrived about ten years ago. But, to date, it offers a generous federal incentive for the purchase of an electric vehicle: up to $ 7,500 in return when filing your taxes for the year you acquired the electric vehicle. That’s why many automakers even advertise vehicles with the built-in incentive, as you’ll get part of the sale price back the following year.
You may be wondering how to apply for the credit or what you need to do to make sure you get the maximum dollar amount back the following year. You may want to know if the amount of the EV tax credit is increasing. We’re here to walk you through the process and help you maximize the financial benefits of choosing an EV.
How do I get the total tax credit of $ 7,500?
The Internal Revenue Service’s Form 8936 is how you calculate the amount you will receive in return, which you will need to complete and report with your taxes. Each vehicle with an outlet earns a minimum of $ 2,500 through the Electric Vehicle Tax Credit, which includes a plug-in hybrid vehicle, not just a fully electric battery-powered vehicle. The vehicle must include at least 5 kilowatt hours of power from its on-board battery. However, the government adds money to the credit for each additional kWh of energy packaged in a battery. For each additional kWh, the tax credit increases by $ 417. This is where the dollar numbers can change as it depends on the vehicle, not your finances.
For example, a Kia Niro plug-in hybrid qualifies for a $ 4,543 tax credit, due to the size of its battery. PHEVs often have smaller batteries than EVs because they share the efforts of the powertrain with an internal combustion engine. But, the Kia Niro EV qualifies for the full $ 7,500 tax credit because of its larger battery size. The government caps the credit at a maximum of $ 7,500. Even for electric vehicles with giant batteries, they are not candidates for more money. In most cases, pure electric vehicles are the target cars for the full cash back of the tax credit.
What is the VE tax credit?
Section 30D of the Internal Revenue Code grants a tax credit to anyone who purchased an eligible electric vehicle during the year. It includes passenger vehicles and light trucks. The credit first came into being with the Energy Improvement and Extension Act of 2008, and changes came with the American Recovery and Reinvestment Act of 2009. The latter really gave us tax credits like us. we know them today.
The credit offers up to $ 7,500 in tax credit when you claim an EV purchase on the taxes produced for the year you acquired the vehicle. So, if you bought an electric vehicle this year, in 2021, you will claim the purchase when filing your 2021 taxes next year.
What if I owe money on my taxes when I apply for the credit?
It’s the best of times, in fact. The VE tax credit is a non-refundable credit. In other words, the government is not writing you a check for the balance. So let’s say you owe the federal government $ 10,000 in taxes when filing your taxes for 2021. Let’s also say you bought ain 2021, who is eligible for the full credit amount of $ 7,500. Your federal tax balance would then drop to $ 2,500. If you owed less than $ 7,500, the EV Tax Credit would reduce that balance entirely to a balance of $ 0, even if it supports the tax bill and more. Essentially, buying an EV can wipe out tax bills very well. However, it doesn’t put money right in your pocket. Keep this in mind if you are someone who typically receives a federal refund when filing income tax.
Why can’t I claim the EV tax credit for my Tesla?
Tesla is by far the largest maker of electric vehicles in the United States today. However, those who buy an electric vehicle from the automaker will not be able to claim the car on their taxes. This is because the current credit law is phasing them out after a particular automaker has sold over 200,000 qualifying vehicles. In the case of Tesla, it , leaving no additional tax credit to take advantage of. It is the same . A Chevrolet, GMC, Buick or Cadillac electric vehicle is not eligible for the electric vehicle tax credit as of today. Car manufacturers continue to press for new legislation to allow them to qualify for credit again.
Can I rent an EV and claim the tax credit?
Unfortunately, there is no tax credit if you decide to lease a new electric vehicle. Instead, the tax credit actually goes to the automaker or lender who finances the leased vehicle. Thus, to really benefit from the advantage of the tax credit, you must buy an electric vehicle, and not rent one.
Do EV Tax Credits Count for Used Electric Cars?
Like renting an EV, buying a used electric car also doesn’t allow you to claim the EV tax credit. However, there is currently legislation at the federal level that could change this.
Will the amount of the EV tax credit increase?
There are various laws which, if passed, would increase the total amount that can be claimed. More importantly, a new bill would increase the amount of the tax credit to. Another bill would include to make them also eligible for more modest tax credits. The Biden administration is keen to so it’s probably only a matter of time before changes are made to the tax credit.
What are the credits and incentives for state electric vehicles?
Many states and even local governments looking to accelerate adoption rates for electric vehicles are offering their own incentives. California is a leader in incentivizing the purchase of electric vehicles with a direct consumer rebate of up to $ 4,500, for example, through the. However, there is currently a waiting list for applications. The states of Colorado, Washington, and New England also offer generous state incentives that you can combine with the Federal Electric Vehicle Tax Credit. Even your local utility company can subsidize an EV purchase.