Used Electric Cars and Taxes

5 minute read

What Tax Credits Exist for Electric Vehicles in the USA?

As electric vehicles (EVs) become more common on American roads, the federal government and many state governments are offering tax incentives to increase adoption. These incentives can help reduce the cost of purchasing and owning an EV, making them more accessible to a wider range of taxpayers.

Many states also offer their own incentives for EV owners. These incentives often include tax credits, rebates, and exemptions from certain taxes and fees. Some states also offer incentives for purchasing charging equipment for EVs.

It's important to note that these incentives and tax credits can change over time and vary depending on the state you live in. It's always a good idea to check with your state's Department of Revenue or Energy Office to see what incentives may be available to you.

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The Electric Vehicle Tax Credit

The Electric Vehicle Tax Credit is a federal tax credit that was established to encourage the purchase of plug-in electric vehicles (EVs). The credit was created as part of the Energy Improvement and Extension Act of 2008 and is available to taxpayers who purchase a qualifying new EV for use in the United States.

The amount of the credit varies depending on the battery capacity of the EV and its gross vehicle weight rating (GVWR). The maximum credit amount is $7,500, but this amount may be reduced depending on the EV's battery capacity and GVWR. The credit is non-refundable, meaning that it can only be used to offset any federal income tax owed by the taxpayer.

Who Qualifies for The Electric Vehicle Tax Credit

To qualify for the Electric Vehicle Tax Credit, the EV must be purchased new and must be used primarily for personal use. The EV must also be purchased by the taxpayer and cannot be leased. In addition, the EV must meet certain requirements related to battery capacity, charging capability, and other factors.

It's important to note that the Electric Vehicle Tax Credit is subject to a phase-out period, which begins once the manufacturer has sold 200,000 qualifying EVs in the United States. Once this threshold is reached, the credit begins to phase out over a period of several quarters until it is eventually eliminated.

How to Claim The Electric Vehicle Tax Credit

To claim the Electric Vehicle Tax Credit, eligible taxpayers must complete Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit, and attach it to their federal income tax return for the year in which they purchased the qualifying EV.

When completing Form 8936, taxpayers will need to provide information about the EV they purchased, including the make and model, the date it was purchased, and the amount of the credit they are claiming. The form will also ask for information about the battery capacity and GVWR of the vehicle, which are used to calculate the amount of the credit.

It's important to note that the Electric Vehicle Tax Credit is a non-refundable credit, which means that it can only be used to offset any federal income tax owed by the taxpayer. If the credit exceeds the amount of the taxpayer's tax liability, any excess credit cannot be carried forward to future tax years.

Additionally, taxpayers should keep records of their EV purchase and any documentation related to the credit, such as the manufacturer's certification that the EV is eligible for the credit. These records may be necessary in case of an audit by the Internal Revenue Service (IRS).

Used Clean Vehicle Credit

The Used Clean Vehicle Credit is a federal tax credit that is available to taxpayers who purchase a qualifying used plug-in electric vehicle (EV) or fuel cell vehicle (FCV) for use in the United States. This credit, also known as the Previously Owned Clean Vehicle Credit, was established as part of the Better Utilization of Investments Leading to Development (BUILD) Act of 2018, and it provides a credit of up to 30% of the sale price, up to a maximum of $4,000.

To be eligible for the Used Clean Vehicle Credit, the qualifying used EV or FCV must have a sale price of $25,000 or less, a model year of at least two years earlier than the calendar year in which it is purchased, and a gross vehicle weight rating (GVWR) of less than 14,000 pounds. The EV or FCV must also meet certain requirements related to battery capacity and be for use primarily in the United States.

To claim the Used Clean Vehicle Credit, eligible taxpayers must complete Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit, and attach it to their federal income tax return for the year in which they purchased the qualifying used EV or FCV. The form will require information about the vehicle's make and model, its sale price, and the amount of the credit being claimed.

It's important to note that the Used Clean Vehicle Credit is non-refundable, meaning that it can only be used to offset any federal income tax owed by the taxpayer. Additionally, taxpayers cannot claim both the Electric Vehicle Tax Credit and the Used Clean Vehicle Credit for the same vehicle.

State and Local Incentives

Some states offer tax credits or rebates for the purchase or lease of new or used EVs, with the amount of the credit or rebate varying depending on the state and the specific program. For example, in California, eligible EV owners can receive a rebate of up to $2,000 for the purchase or lease of a new EV, while in Colorado, eligible EV owners can receive a tax credit of up to $5,000.

Other states offer exemptions from certain taxes and fees related to owning and operating an EV. Additionally, some states offer incentives for installing EV charging infrastructure, such as tax credits or grants to offset the cost of installation. These incentives can be particularly helpful for businesses and organizations looking to provide EV charging for their employees or customers.

It's important to note that the availability and amount of state and local incentives for EVs can vary depending on the state and the specific program.

Conclusion

Overall, these tax credits and incentives can help reduce the cost of owning an EV and make them more accessible to a wider range of taxpayers. As EVs become more common on American roads, it's likely that more incentives and tax credits will be introduced to encourage their adoption and support the growth of a cleaner, more sustainable transportation system.

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