Electric Vehicle Tax Credit For 2021

Sales of 2022 of Electric Vehicles continues go grow. President Biden's Build Back Better bill would increase the electric car tax credit from $7,500 to $12,500 for qualifying vehicles, however this bill has only passed and not the Senate as of April 2022. 

In 2021, United States electric vehicle sales grew to over 430,000, increasing from 2020. In 2020, the number of EV or electric vehicles decreased to 322,000 from 2019. However, the 2020 electric car market share increased some. In 2019, around 329,000 electric vehicles were sold, 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.

health-savings-account-hsa

Theodor Vasile, Unsplash
@theodorrr

Tax Credit for Buying a New Electric Vehicle or EV

Can I claim a tax credit for buying a new Tesla? What about a new Hyundai electric vehicle? Find out here.

Important: IRS or federal tax credits by manufacturer for new all-electric EV and/or plug-in hybrid vehicles are available for current, previous, and future tax years. During 2021, the U.S. Senate, through a non-binding solution, has approved a $40,000 price threshold on qualifying electric cars that would be eligible for a $7,500 federal tax credit; the credit may also be increased to a maximum of $12,500. Additionally, the credit may only be applicable to taxpayers with an annual income of $100,000 or less, regardless of filing status. Essentially, this will prevent wealthier Americans from taking advantage of additional tax savings. Once this credit has been ratified, we will update this page.

If you purchased an electric or alternative motor vehicle in 2021, you may be able to claim credit on your 2021 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 Qualified Plug-In Electric Drive Motor Vehicle Credit can be worth up to $7,500 in nonrefundable credit. 

These vehicle tax credits are available for 2021 Tax Returns:

When you prepare and e-File your 2021 Tax Return on eFile.com, you don't need to worry about which of the credits above you qualify to claim on your tax return. Simply answer a couple of questions and the eFile app will select the correct tax credit form(s) for you to complete. The app will also calculate and enter your credit amount on your return. See how much your 2021 Refund in 2022 could be and prepare to prepare for Tax Day, April 18, 2022. Read on to learn more about these credits.

Qualified Plug-In Electric Drive Motor Vehicle Tax Credit

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:

  • You purchased this vehicle new,
  • The vehicle has a 4 kilowatt hour storage battery which is charged externally,
  • Your electric vehicle or EV weighs less than 14,000 lbs., and
  • You are claiming the credit 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 4 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 2021 Taxes ranges from $2,500 to $7,500 per new electric vehicle (EV) purchased for use in the U.S. beginning on January 1, 2021. 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 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. 

Does the Electric Vehicle Tax Credit Run Out?

The credit will begin to phase out when at least 200,000 qualifying vehicles manufactured by each company have been sold in the U.S. There are current efforts to eliminate this threshold - we will update this page if anything becomes law. As of February, 2022, the only two companies to begin phasing out are Tesla and General Motors. Once the process has begun, purchasers of electric vehicles are 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 2021, they are not eligible for a tax credit.

To claim the credit on eFile.com, you can prepare and eFileIT Form 8936 along with Form 1040. Once you answer a few simple questions about your tax situation, we will generate the forms for you and help you complete them accurately. If you bought a qualifying vehicle in the past six years and you did not claim it on your tax return, you can still get the credit by filing an amended return. Claim this credit when filing your 2021 Tax Return on eFile.com.

Additionally, the tax credit does not carryover or carry forward if you do not use it in the year you purchased the vehicle. In other words, if you did not use the part of the personal portion of the EV tax credit, then the unused credit is lost.

Vehicles that are Eligible for the 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:

Make
Model(s)
Credit Amount
AMP Electric Vehicles, Inc.
GCE and MLE (2012)
$7,500
Audi of America, LLC
e-tron SUV (2019, 2021-2022); Sportback (2020-2022);
$7,500
Azure Dynamics, Inc.
Transit Connect Electric Vehicle (2011, 2012)
$7,500
BMW of America
i3s and i3 Sedan (2014-2021)
$7,500
BMW of America
MINI Cooper S E Hardtop (2-Door) (2020-2022)
$7,500
Boulder Electric Vehicles, Inc,
Delivery Van DV-500 (2013);
Electric Shuttle DV500 (2013);
Electric Flat Bed DV-500 (2013);
Electric Service Body DV-500 (2013)
$7,500
BYD Motors
e6 Electric Vehicle (2012-2017)
$7,500
CODA Automotive
Sedan (2010, 2012) 
$7,500
Electric Vehicles International
(EVI)-MD (Medium Duty) Electric truck (2011-2012);
EVI-WI (Walk-In) Electric truck (2011-2012)
$7,500
Electronic Motor Cars
EMC Model E36 7 Passenger Wagon (2010);
Model E36t Pick-Up truck (2010);
Model E36v Utility Van (2010)
$7,500
FCA (Fiat, Chrysler Automobiles) North America Holding, LLC.
Fiat 500e (2013-2020)
$7,500
Ford Motor Company
Focus EV (2012-2018)
Mustang Mach-E (2021)
$7,500
General Motors, LLC.
Chevrolet Bolt (2017-2020);
Chevrolet Spark EV (2014-2016);
*$$7,500 if acquired through 3/31/2019;
$3,750 (4/1/2019 - 9/30/2019);
$1,875 (10/1/2019 - 3/31/2020)
Hyundai
Ioniq Electric (2017-2021); Kona EV (2019-2022)
$7,500
Jaguar Land Rover North America, LLC.
I-Pace (First Edition, HSE, SE, S models) (2019-2021)
$7,500
Kandi
EX3 (2019-2021); K22 (2019-2020);
K23 (2020 - 2022); K27 (2020-2022)
$7,500
Kia Motors America, Inc.
Soul Electric (2015-2020); NIRO EV (2019-2022);
EV6 (2022)
$7,500
Mercedes-Benz USA, LLC
Smart USA Distributor, LLC
B-Class EV (B250e) (2014-2017);
smart fortwo EV (2013-2018);
smart EQ fortwo Cabrio (2019);
smart EQ Fortwo Coupe (2019)
$7,500
Mitsubishi Motors North America, Inc.
i-MiEV (Electric Vehicle) (2012, 2014, 2016, 2017)
$7,500
Nissan North America
LEAF (2011-2020)
$7,500
Polestar Automotive USA Inc.
Polestar 2 (2021-2022)
$7,500
Porsche Cars North America, Inc.
Taycan EV (4S, Turbo, S) (2020);
Taycan EV (all models) (2021)
$7,500
Rivian Automotive, LLC
R1T (2022)
$7,500
Tesla, Inc.
Roadster (2018-2011); Model S (2012-2019);
Model X (2016-2019);  Model 3 Standard Range (Plus) (2019-2020);
Model 3 Long Range (2017-2019);
Model 3 Long Range AWD and AWD Performance (2019);
Model 3 Mid Range (2018-2019)
 $7,500 if acquired through 12/31/2018;
$3,750 (1/1/2019 - 6/30/2019);
$1,875 (7/1/2019 - 12/31/2019)
Think NA
Think City EV (2011)
$7,500
Toyota Motor Sales, U.S.A., Inc.
RAV4 EV (2012-2014)
$7,500
Volkswagen Group of America
e-Golf (2015-2019);
ID.4 (First, Pro, Pro s) (2021)
$7,500
Volvo Cars of North America, LLC
XC40 Recharge Pure Electric P8 AWD (2021-2022)
$7,500
Wheego Electric Cars, Inc.
LiFe EV (2011)
$7,500
Zenith Motors, Inc.
Electric Van (2014-2017); Electric Minibus (2016-2017)
$7,500

*Companies who have initiated phasing out indicate different, decrementing values based on the year purchased. Currently, only General Motors and Tesla have begun this process which has been completed, making them no longer eligible for the credit.

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 a cash rebate up to $7,000 for a taxpayer who purchases a new electric vehicle.

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.

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 for 2021. Claim the credit online on Form 8936 - eFileIT on eFile.com.

Charging Costs and Electric Vehicles

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

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.

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. The credit can be claimed for cars purchased in 2015 - 2021. eFile.com can be used to generate the information for Form 8910 - FileIT - to claim the credit and attach it to your 2021 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.

For Tax Year 2021, 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
  • 2018-2022 Hyundai Nexo
  • 2020-2022 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. Please contact eFile.com support if you have further questions or need more help with your 2021 Tax Return.

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

WatchIT