The Old Electric Vehicle or EV Tax Credit

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In 2023 and beyond, the IRS and federal government revised and established the electric vehicle or EV tax credit to be called the Clean Vehicle Tax Credit. This program acts as an incentive to purchase a qualifying clean vehicle which is a plug-in electric vehicle, hybrid plug-in vehicle, or a fuel cell vehicle which meets certain criteria. Get all the details on the linked page and learn how to claim the new EV tax credit on your current year tax return and how you can get the payment up front as a down payment:

Clean Vehicle Tax Credit

Qualified Plug-In Electric Drive Motor Vehicle Tax Credit

Note: The below information applies to taxes prior to 2023.

The Qualified Plug-In Electric Drive Motor Vehicle Credit, commonly referred to as the federal EV tax credit, can be worth up to $7,500 in nonrefundable credit. For previous year returns, there is also the Alternative Motor Vehicle Tax Credit which can be claimed for fuel cell vehicles.

The first EV tax credits were introduced under President George W. Bush in 2008. You may be able to claim a tax credit for placing a new, qualified plug-in electric drive motor vehicle into service. Generally, most electric vehicles qualify for the credit and all typically earn you the full amount of $7,500, but there are some criteria.

Key points on how the EV tax credit works:

• The vehicle was purchased new,
• It has a 5 kilowatt hour storage battery which is charged externally,
• The electric vehicle or EV weighs less than 14,000 pound, and
• The credit is being claimed for the year the vehicle was purchased and put into service.

This is a vehicle that, under IRS Section 30D, weighs less than 14,000 pounds, runs significantly by an electric motor, draws electricity from a battery that holds at least 5 kilowatt hours, and is capable of being recharged from an external source of electricity. This means it cannot be a traditional hybrid vehicle, or HEV, as it does not draw power externally. See information regarding hybrids and plug-in hybrids that may qualify for the credit.

The vehicle in question must be purchased new - it cannot be used and/or leased for you to receive the credit. The IRS tax credit for 2022 and earlier ranges from $2,500 to $7,500 per new electric vehicle (EV) purchased for use in the U.S. This nonrefundable credit is calculated by a base payment of $2,500, plus an additional $417 per kilowatt hour that is in excess of 5 kilowatt hours. This value cannot exceed $5,000, thus limiting the total credit to $7,500. (Note: a nonrefundable credit is an amount that only goes towards the taxpayer's tax liability. If you are expecting to owe $5,000 in taxes, but file for a $7,500 credit from a recently purchased electric car, you would expect to see $5,000, eliminating the difference of $2,500). This credit does not carry forward and must be used for the year it was purchased.

The electric car tax credit is similar to a rebate in that you cannot use it to purchase the vehicle, but can claim it after your purchase the vehicle. However, it is also unlike a rebate because it is not refunded you since nonrefundable tax credits can only be used to offset any taxes you may owe.

This credit can also be applied to a two-wheeled vehicle if certain circumstances are met. These are:

• The vehicle was purchased new,
• It can reach a speed of 45 miles-per-hour or more,
• It draws significant power from an electric motor,
• The battery has a minimum capacity of 2.5 kilowatt hours,
• It can be charged externally, and
• The vehicle weighs less than 14,000 pounds.

The credit for two-wheeled vehicle can be claimed for 10% of the cost of the vehicle in consideration up to a maximum of $2,500.

If you purchased an electric or alternative motor vehicle this year, you may be able to claim credit on your next tax return. You may also be able to amend a tax return to claim credit if you purchased it in a previous year and owed taxes. This tax credit is nonrefundable and will only offset your tax liability for a given tax year. The EV tax credit details can be found below; learn about the Tesla EV tax credit, Chevy Bolt EV credit, Nissan LEAF credit, and more of the best electric cars which may be eligible for this federal vehicle credit.

Important: the phaseout information here applies only to vehicles purchased prior to 2023.

The credit began to phase out when at least 200,000 qualifying vehicles manufactured by each company had been sold in the U.S. The only two companies to begin phasing out were Tesla and General Motors. Once the process began, purchasers of electric vehicles were eligible to claim 50% of the credit if the vehicle was acquired in the first two quarters that the 200,000 limit had been reached. If filing for a vehicle purchased in the second two quarters, file for a nonrefundable credit amounting to 25% of the original amount. To see an example of this, find the amounts for General Motors or Tesla in the table below. Both Tesla and GM have finished this process; if you purchased either of these vehicles in 2022, they are not eligible for a tax credit.

Eligible Vehicles for the Original EV Tax Credit

All of the following electric vehicles qualify for the credit for Qualified Plug-In Electric Drive Motor Vehicles. They have different credit amounts depending on the power output of the battery:

*Companies who initiated phasing out indicate different, decrementing values based on the year purchased. Only General Motors and Tesla finished this process, making them ineligible for the credit for vehicles purchased in 2022.

See a list of qualifying plug-in hybrids.

In addition to these nonrefundable credits, different states offer rebates to encourage taxpayers to invest in electric vehicles. For example, California offers an EV tax credit in the form of a cash rebate up to $7,000 for a taxpayer who purchases a new electric vehicle. This is the state's Clean Vehicle Rebate Program or CVRP which is good for plug-in hybrid vehicles, battery electric vehicles, and fuel cell electric vehicles.

Should an electric vehicle be purchased for business purposes, it may be eligible for the credit and claimed on Form 3800, General business Credit - eFileIT.

In 2021, United States electric vehicle sales grew to over 430,000 units in the year, increasing from 2020. In 2020, the number of EV or electric vehicles decreased to 322,000 from 2019 where around 329,000 electric vehicles were sold, all according to the U.S. Department of Energy. Some of the most popular all electric vehicles were from Tesla, including the Model 3, Model X, and Model S, with the Model 3 selling almost 300,000 units in 2018 and 2019 combined. The Nissan Leaf sold more than 10,000 units in each year, 2018 and 2019.

Do you own any of the vehicles in this list or want to invest in one? Get the most out of that purchase when you file your taxes. Claim the credit online on Form 8936.

Charging Costs and Electric Vehicles

How much does it cost to charge a Tesla? Can you charge an electric vehicle overnight at home?

Depending on the state, electric car charging stations can be found in more populated areas of the U.S. where more EVs are present. Owners can also charge their Tesla or other electric car at home. How long it takes to charge an electric car and how much it costs depends on the charging conditions.

Most all-electric vehicles have similar battery storage sizes, so they all require the same power output to charge and will take similar amounts of time to fully recharge. The cost to charge an electric vehicle depends on the storage of the battery. For example, the Tesla Model X has a 100 Kilowatt hour (kWh) battery. Assuming the average cost of electricity in the United States of around 14 cents per Kilowatt hour ($0.14/kWh) according to the Energy Information Administration or EIA, the cost my vary based on the charging set up. Additionally, there is power loss in AC chargers, typically resulting in an efficiency of 80-90%. The examples below assume charging from a power level of 0 to 100 or full charge.

• Level 1 AC charging
  • Standard, universal charging from a common home outlet or wall socket. The charge will take days instead of hours which is much longer in comparison to level 2 AC charging. This can be anywhere from 20-40 hours and will add up to $14.00 for a full charge or more if accounting for lost power. Depending on how often the vehicle is used and charged, consider this when purchasing an electric vehicle you plan to charge at home.
• Level 2 AC charging
  • Offered by Tesla as well as other third party manufacturers. These chargers are similar to an outlet used for an at-home dryer or other large appliance and can be simply installed by an electrician or other specialist. Tesla and other companies recommend installing this type of charger at home. Charging with a level 2 system can charge overnight, or around 8-12 hours for a full charge up to $14.00 in electricity. The amount does not vary since the cost is based on how much power is output into the battery, not the amount of time it is charged.
• Level 3 DCFC or Tesla Supercharger
  • DCFC or direct current fast chargers abandon the alternating current (AC) method and require much more power, but offer far superior charging speeds at under an hour. Since this requires more power, the average cost for this electricity increases, according to the EIA, to around $0.22 or 22 cents per kWh. The charging is much more efficient at around 90-99%. Using the Model X, this would be around $23.00 to fully charge at 100 kWh.

With widespread competition, electric vehicle range in prices. There are Kia electric cars, electric vehicles from BMW, and the well-known Tesla. Consumers may be able to purchase electric vehicles for prices they are used to for traditional gas vehicles, like the cheapest electric cars starting at $30,000. This goes up to the most expensive electric vehicles like those from Porsche, Audi, and Mercedes-Benz which may start at around $100,000.

Alternative Motor Vehicle Tax Credit

The Alternative Motor Vehicle Tax Credit can be claimed for placing a qualified fuel cell vehicle in service and may only be claimed by the original purchaser of the vehicle. A qualified fuel cell motor vehicle is a vehicle propelled by power from one or more cells which convert chemical energy directly into electricity. Currently, hydrogen fuel cell electric vehicles qualify. eFile.com can be used to generate the information for Form 8910 - FileIT - to claim the credit and attach it to your next tax return. You can prepare and file these forms on eFile.com. Once you answer a few simple questions about your tax situation, we will generate the forms for you and help you complete them accurately.

Only partnerships and S corporations should report it on Form 3800, General Business Credit. Other taxpayers, when filing on eFile.com, will use the eFile app to report the information on Form 8910, Alternative Motor Vehicle Credit.

Below is a list of some certified fuel cell motor vehicles that may qualify for the credit:

• 2008-2012 Honda FCX Clarity
• 2016 Honda Clarity Fuel Cell
• 2018-2023 Hyundai Nexo
• 2020-2023 Toyota Mirai II
• Hyundai Xcient Fuel Cell

Refer to the vehicle's manufacturer for certification of the vehicle's status as a qualified alternative motor vehicle. The manufacturer should be able to provide a copy of the certification letter from the IRS.

Similarly to electric vehicles, states offer incentives for purchasing alternative motor vehicles. California, for example, may offer a rebate worth up to $4,500.

Find out how to claim tax credits for energy-efficient improvements to your home or other home improvement deductions. In addition, see other tax credits and tax deductions that you may qualify to claim on your tax return. When you prepare and e-file your return on eFile.com, the eFile app will select and enter any deductions and credits you qualify for on your tax return. Claim your EV tax credit on eFile.com; contact eFile.com support if you have further questions or need more help with your taxes.

See also: Can I claim a tax credit for a hybrid or plug-in hybrid?

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