Considering buying or leasing an electric car?

With the rising cost of gas, many families are now considering buying or leasing an electric car. While the cost of purchasing an electric vehicle may be prohibitive for some, sales are steadily increasing and there are a number of credits and rebates available for qualifying purchases which may persuade you that you can afford to make the switch.

Federal income tax credit

$7,500 is the current maximum amount available to buyers of new fully electric or plug-in hybrid cars. The credit is a deduction on your federal income tax return for the calendar year that you bought the car – so ensure you advise your advisor when you purchase a new EV. It’s worth noting however that you can only get the deduction if you owe taxes, and if you owe taxes totaling less than the maximum credit allowed, you can deduct what you owe, but not more.

Batteries

Credits are based on battery size. Most current plug-in models entitle you to the full $7,500 credit, however hybrids typically earn less credit. For a list of what applies to each car model visit the Internal Revenue website here.

Qualifying car models

It’s important to note that not all models will qualify for the federal credit, as it is only available until a company sells 200,000 of a particular model before being phased out. Make sure you ask your dealer whether the federal tax credit is still available for the car you’re looking to purchase.

Different state rules

Programs vary from state to state.

California, the state where the most electric cars are on the road, has a wide range of electric car rebates when you purchase or lease a qualifying car, which are detailed on the California Air Resources Board website here. Income and residency eligible awards are also available via the California Clean Vehicle Rebate Program.

In New York State a Drive Clean Rebate of up to $2,000 is available for new electric car purchases or leases. You are required to keep the vehicle for a minimum of three years, and you must be a resident of the state.

Local utility discounts

Before installing an at-home charger, you should check with your utility provider whether they have any incentives or rebates available.

How we can help

If you need help or advice with your finances, contact us today. TaxAssist offers an expert professional advisory service. Inquire online here to book your free, no obligation consultation.

Date published May 17, 2022 | Last updated Jul 22, 2022

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.