Let’s see what is an electric car tax credit and all other details related to EV tax credit today.
Why do you buy an electric vehicle?
There are many advantages to buying an electric car. Electric cars slowly capture the automotive market.
Since the World’s major vehicle manufacturers stepped into electric mobility, the electric vehicle revolution gained momentum.
The government promotes electric vehicles by providing tax credits, incentives, and free parking facilities. The main intention is to promote eco-friendly transportation and reduce the possible pollution from IC engine vehicles.
There might be other factors such as to reduce the dependency on oil-exporting countries.
Electric Car Tax Credit: Let’s check out the following questions
We will discuss the following questions about electric vehicle tax credit here in this post.
- What is an Electric Vehicle Tax Credit?
- Why the Government provides Electric Car Tax Credit?
- How much is the EV tax credit/
- How to claim the electric vehicle tax credit?
#1 What is an Electric Vehicle Tax Credit?
An electric vehicle tax credit is an incentive given by the Government to consumers who buy electric cars.
A tax credit is a tax incentive that allows certain taxpayers to subtract the amount of the credit they have accrued from the total they owe the state. It may also be a credit granted in recognition of taxes already paid or a form of state support. [Wiki]
The EV tax credit is only meant for the EV owners.
Following are the countries that provide incentives to the owners of electric vehicle
- South Korea
- Czech Republic
- United Kingdom
- United States
If the incentive for Electric Vehicle is available in your country, please let me know and I will update the list!
#2 Why the Government provides Electric Car Tax Credit?
The initial cost to purchase an electric car is higher than that of an internal combustion engine car.
Electric car technology is being advanced day by day and the cost reduces. Even though the automotive industry starts focussing on EVs, the initial cost is still higher than that of IC engine vehicles.
But the scarcity of fossil fuels, environmental pollution from the IC engine vehicles makes the authorities and manufacturers to think about alternative fuel vehicles.
The electric vehicle is the best choice among the vehicles.
The Government wants the citizen to use electric vehicles more. They had introduced tax credits for electric vehicle owners.
The electric vehicle tax credit is meant to
- Promote electric vehicles
- Encourage people to buy electric cars
- Reduce the environment pollution
#3 How much is the EV tax credit?
The tax credit varies with country and state.
In the United States, the tax credit varies between $2500 and $7500. The buyer of a new electric car shall get the federal tax credit. The tax credit depends on the capacity of the battery and the size of the vehicle.
The expiration of this federal tax credit only comes when more than 200,000 electric cars from each manufacturer have been sold and used the credit.
As we mentioned earlier, the owner of the electric vehicle is entitled to claim the tax credit. So if you lease the vehicle then you are not eligible for the electric car tax credit.
You can check the electric car tax credit on the official website of the government where you live.
#4 How to claim the electric vehicle tax credit?
You can claim the tax credit when you file an income tax return. Many countries follow the same rule.
But in some countries, you can buy electric vehicles at a subsidized price and can’t claim the tax return later.
In the United States…
You can check out the form here: Qualified Plug-in Electric Drive Motor Vehicle Credit Form 8936
Since the federal tax credit is non-refundable, it can’t be applied to your tax refund. So, the EV tax credit won’t necessarily put money back in your pocket, but it might keep some there.
For example, if your tax credit for your new electric car is $7500, but you only owe $3000 in taxes, you can only claim $3000 of the credit.
This will prevent you from paying what you owe, but you won’t get to take home a bigger refund.
Is Electric Vehicle Tax Credits Refundable?
According to TaxAct.com, “The Qualified Plug-In Electric Drive Motor Vehicle Credit is a non-refundable credit. A non-refundable credit can reduce your tax liability to zero, however, it cannot result in a refund.”
Read more: https://www.energy.gov/eere/electricvehicles/electric-vehicles-tax-credits-and-other-incentives
Here is a video that explains how the electric car tax credit works in the US.
Other Financial benefits of owning an EV
Apart from the tax credit, there are many advantages of owning an electric car.
A few are given below
- Rebates and vouchers
- Reductions to the fee for vehicle registration
- Special loan approvals
- High occupancy vehicle lane use
- Occasional free parking
We discussed the electric car tax credit here. The common questions related to the electric vehicle tax credit, incentives, etc. were explained.
Many countries provide incentives to electric vehicle owners to promote the use of eco-friendly transportation.
You can open the relevant links to the websites for more detailed information!
Are you ready to buy an electric vehicle?
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- Tax credits are for owners only
- The electric car tax credit is not for resellers
- To qualify for the tax credit in the US, the vehicle has to be mostly used in the US
- Not all cars get the tax credit
- The battery of the EV must be able to store at least 4 kWh of energy
- The vehicle should be a plug-in electric vehicle
- An electric vehicle tax claim can be denied, the IRS always has that right