It’s not fanciful to believe that many of us will see the sunset of gas-powered vehicles in our lifetime. At the United Nations Climate Change Conference, major automakers (Ford, General Motors, Mercedes-Benz, Volvo, Jaguar Land Rover, and BYD) signed a pledge to end the sale of gas and diesel-powered cars by 2040, as did thirty countries. Slowly, electric vehicles will become the standard, and incentives to purchase them will dwindle or disappear entirely.
Until then, tax breaks are one of the most significant benefits of being on the cutting edge of electric vehicle ownership (besides the opportunity to make the right choice for the Earth). Now is the time to get in on those deals; we’re already seeing limitations put in place as more people turn to EV purchases: effective January of 2023, eligibility limits go into effect based on the cost of the vehicle and the income of the buyer. Additionally, the EV must be assembled in North America to qualify for the tax breaks. Some of the changes are good, though: “Starting in 2024, a new mechanism will allow buyers to take the EV tax credit directly from the dealer at the points of sale rather than having to wait for the next tax season” (Edmunds).
Let’s take a look at the tax incentives as they stand now, at the federal, state, and local levels – plus how you can supercharge your savings with solar power.
The Federal Benefits
The standard number you will see quoted for tax credits on electric vehicles is $7500. This is true for many EVs, if they are all-electric or plug-in hybrids purchased new after 2010. However, some vehicles are being phased out of this program. Check which tax credits your vehicle is eligible for here (and remember that income and vehicle cost limits are going into effect).
Used electric vehicles also earn tax credits. That credit is 30% of the vehicle’s value or $4,000 (whichever is less), for electric vehicles up to $25,000. Like with incentives for new-car purchases, income limits and other restrictions apply.
Which forms you fill out will depend upon how you’re claiming the vehicle (for personal use or business use), but your tax preparer or tax software can walk you through those specifics. Most importantly, know that starting in 2024 you can opt to have the tax credit immediately reduce the cost of the vehicle at the point of sale. That means you pay less from day one rather than having to wait until tax season to see your savings in action.
State and Local Benefits
State and local benefits are less straightforward than federal benefits because, of course, they vary depending on where you live. Find your state on this handy chart and start reading.
As an example, let’s look at Massachusetts, which is considered one of the best states for EV incentives (other states with particularly lucrative tax options include Colorado, Connecticut, Delaware, Maryland, California, Oregon, and New York).
In addition to the federal benefits, if you live in Massachusetts, you may qualify for a $2500 rebate for new electric vehicles that cost less than $50,000 and $1500 for plug-in hybrid vehicles. To see immediate savings, you can also take $700 off the purchase price of an electric vehicle.
Keep in mind that you will need to buy your vehicle in MA because MORE-EV, the program that manages these incentives, has limited eligibility as of May 2022. Now, only EVs “purchased or leased from licensed dealerships or retail locations in the Commonwealth of Massachusetts” qualify, though there is a loophole for eligible vehicles purchased outside MA “where no distribution channels are available in Massachusetts” (MORE-EV).
If you’re considering installing a charging station, be sure to look for tax breaks there, too. You may be entitled to free or discounted charging via the Home Energy Loss Preventions Services (HELPS) program. See a full breakdown of MA laws and incentives on the Department of Energy website.
The Bottom Line
The government wants to pay us to switch to electric vehicles, so let’s take advantage of it! The future of the auto industry is electric, so these tax breaks will only last for a limited time. Get in on this inevitability early to benefit the most.
If you’re ready to go one step further, you might even consider investing in solar energy to charge your electric vehicle. Not only is this an eco-conscious option, but the government is currently incentivizing solar energy just like they’re incentivizing electric vehicle ownership. For example, at the federal level, solar electric systems are eligible for tax credits from now until 2034. At the local level, those benefits again vary based on locale. In Massachusetts, you can receive up to a $1000 state tax credit.
A final benefit of buying or leasing an electric vehicle? You can join us over at You.Car, an all-electric rideshare company. Benefit from extra income streams and a car loan paydown program unlike any other. Check it out!