How Does the Federal Tax Credit for EVs Work?

If you have been researching an electric vehicle (EV) to buy in the Henrico area, you’ve probably heard about the federal incentive. But what is it, and how does the federal tax credit for electric cars work, exactly? The federal tax credit starts at a minimum of $2,500 and can go up to $7,500, depending on the car’s traction battery capacity and gross vehicle weight rating. When you purchase an eligible EV, you may be able to earn this credit, so this is yet another reason why a driver like yourself might opt for an EV. Find out which models qualify for this credit and if you can enjoy this incentive below with the finance team at Rick Hendrick Chevrolet Buick GMC Richmond!

Which Models Are Applicable for this EV Tax Credit? 

Whenever this electric car tax credit is mentioned, it often sounds like every electric model is applicable. However, that is false. You may be able to earn this credit when you buy a qualified new EV starting in 2023. In addition to the model being new, a qualifying EV also needs to meet the following criteria:

• Draws propulsion using a traction battery that has at least 7 kilowatt-hours (kWh) of capacity
• Has a gross vehicle weight rating (GVWR) of up to 14,000 pounds
• Has to be mostly driven in the United States
• Undergo final assembly in North America
• Meet critical mineral and battery component requirements (as of April 18, 2023)

Am I Eligible for the Federal EV Tax Credit? 

You’ve checked that the model you want is qualified for this tax credit. Now, you’ll need to see if the credit can be applied to your taxes. First, remember that this tax credit is only available if you buy the vehicle. If you lease an EV instead, the tax credit will go to the lending institution instead as they technically own it. 

Once you know you’re set on buying an EV for your Glen Allen drives, you’ll need to consider two factors: whether your household qualifies for the credit and how much you will owe in income tax for that year. The electric car tax credit is only available to:: 

• Married couples filing jointly with an adjusted gross income of $300,000 or less
• Heads of households with an adjusted gross income of $225,000 or less
• All other filers with an adjusted gross income of $150,000 or less 

If you fall into any of those brackets, the next consideration is how much you’ll owe in income tax. This amount is key because it caps how much of the tax credit you can get. For example, if you buy an electric model eligible for the full $7,500 and you owe $3,000 in income tax, then you can only earn $3,000 of the credit. Similarly, say if that model is only eligible for $1,500, then you will earn only $1,500 instead. In other words, you can only earn the full amount if you owe at least $7,500 in income tax the year you bought your EV and the model has an eligible electric car tax credit for $7,500. Keep in mind that you cannot pass on the tax credit to someone else or apply the unused credit to future taxes.

How Long Will the Federal EV Tax Credit Be Available? 

The Inflation Reduction Act of 2022 altered the rules for the original Federal electric car tax credit and now has an extended timeline to bring even more value to eco-friendly Goochland drivers. This electric car tax credit applies to all vehicles purchased from 2023 through 2032, giving you plenty of time to plan for your next EV. 

Save on a Buick, Chevrolet, GMC EV Today in Richmond! 

Now that you know the answer to “How does the federal tax credit for electric cars work?” figure out if you’re qualified to claim it! Make sure to check out the new vehicle specials at Rick Hendrick Chevrolet Buick GMC Richmond and speak with our finance team to see how else you can save on your EV purchase in Richmond. Contact us with any questions, and we’ll be happy to get you into the electric world at a price that you love!