EV Tax Credits Explained [+ 2023 EV Tax Credit Calculator]
Steve Birkett is an electric vehicle advocate based in Greater Boston, Massachusetts. He is a content creator and marketing professional who contributes written and recorded pieces to a wide range of media outlets. His analysis has been featured in Find The Best Car Price, WWLP TV, and Torque News, among others. He has also had video content featured on Inside EVs. Birkett was an EV Guide for Plug in America events in Massachusetts (Drive Electric Cambridge and Drive Electric Lowell) and Ohio (Earth Day 2019 at Cleveland Zoo). He participates in quarterly advisory panel meetings for EVolve New York (a state-level charging initiative) and has contributed to focus groups for prominent U.S. charging networks.
Birkett is a father-of-two who loves nothing more than packing up the family and hitting the road in their latest electric car, which is currently a 2022 Hyundai IONIQ 5. With multiple Chevy Bolts in his past, as well as a Chevy Volt and Tesla Model 3 LR in the extended family, plus various EV rentals when he ventures back home to his native United Kingdom, Birkett has more than 100,000 all-electric miles under his belt and is always ready to try out a new electric vehicle.
For press inquiries, contact [email protected]
Last Updated: May 2023
A key factor holding many people back from moving to electric vehicles (EVs) is the initial cost. You might hear this called the "EV premium". Although an EV saves you money over the lifetime of the vehicle, they are usually more expensive upfront than a traditional combustion vehicle.
Thankfully, both federal and state incentives for buying an EV are in place to help reduce this initial financial burden.
Let's review some of the most widely available incentives, as well as how to find your local and state-level electric car incentives.
Table of Contents
Federal Electric Vehicle Tax Credit Calculator
Find out if you and the EV you are considering qualify for any federal incentives by entering the details into the EV incentives calculator below.
You can also view specific details on the Federal EV Tax Credit at fueleconomy.gov. However, always consult a tax professional to review your specific tax situation and confirm eligibility.
How Does the EV Tax Credit Work?
A federal EV tax credit program offers up to $7,500 in incentives when you buy a qualifying EV, depending on your personal circumstances. The type of vehicle you choose and your tax burden impact how much of the federal incentive you can access. Additionally, the capacity of the battery used to power the vehicle you buy must be at least 7 kWh, among other qualifying criteria.
Qualifying electric, hydrogen, and plug-in hybrid vehicles placed into service from 2023 onwards are eligible for the federal tax credit for new clean vehicle purchases. A separate tax credit of up to $4,000 is in place for purchases of used clean energy vehicles sold for less than $25,000.
Since the federal electric car incentive is not yet a tax rebate, you can only claim an amount up to your tax liability in the year you claim the credit. The tax credit lowers the federal tax liability on your income for that year. This is expected to change in 2024, but for the moment your tax burden is key to getting the most money off an EV purchase.
Qualifications for the Federal EV Tax Credit
There are some key qualifying criteria that vehicles must meet for different aspects of the federal tax credit. For a vehicle to be eligible, it must:
Be assembled in North America- Be made by a qualified manufacturer and meet minimum sourcing requirements for battery component and critical minerals
- Charge from an external source.
- Contain a battery pack with a capacity of 7 kilowatt hours (kWh) or more.
- Be 100% battery-electric or have a plug-in hybrid drive train.
- Be intended primarily for use on US roads.
- Earn below set income thresholds.
Be assembled in North AmericaEV Tax Credit Income Limits
The federal tax credit for electric vehicles is only available to buyers earning below its income qualification caps. Note that the income limits are different depending on whether you are buying a new EV or a used one.
Following updates in 2023, the current EV tax credit income limits for buying a new electric vehicle are as follows:
- $300,000 for married couples filing jointly
- $225,000 for heads of households
- $150,000 for all other filers
For buyers considering a used electric vehicle, the EV tax credits are only available for those earning less than the following caps:
- $150,000 for married couples filing jointly
- $112,500 for heads of households
- $75,000 for all other filers
How to Claim the $7,500 EV Tax Credit
The range of electric vehicles that qualify for the federal new EV incentives continues to change as manufacturers add new models and move electric vehicle production facilities to North America. Use our EV incentive calculator above to identify the latest qualifying models and see whether or not your intended purchase qualifies.
Since the federal EV incentive is a tax credit, you do not get it immediately upon purchasing the EV. You apply for the EV federal tax credit when you file your taxes for the year in which you purchased the vehicle. If you purchased a new EV in May of 2023, for example, you would apply for the tax credit when you file your 2023 taxes at the beginning of 2024.
You must fill out IRS Form 8936 when filing your annual income tax returns. Keep in mind that not all online or software-based tax systems support this form.
Does the EV Tax Credit Apply to Used Cars?
A separate incentive from the new clean vehicle federal tax credit exists for used EV purchases. This provides qualifying buyers with a credit of up to $4,000 when purchasing a used EV priced below $25,000.
For a used EV to qualify for this credit, it must:
- Be purchased on or after January 1, 2023
- Be purchased for personal use, not resale
- Be more than two years older than the current model year
- Have a gross vehicle weight rating below 14,000 lbs
- Have a battery capacity of at least 7 kWh
- Be sold via a licensed dealership
- Not have already claimed a used EV tax credit
Does the EV Tax Credit Apply to Leased Cars?
Only the vehicle’s titleholder can claim the EV tax credit. While leasing an EV is great for the environment and allows you to upgrade to newer technology every few years, you will not be able to claim the EV tax credit directly. Some lenders will factor in the tax credit to the monthly payment calculations, which would allow you to absorb some of the benefit of the tax credit in the form of lower monthly payments.
State EV Incentives
In addition to the federal tax credit, electric vehicles may also qualify for local and state incentives. Of course, the amount and type of incentives available to you depend on the programs offered in your state. In some cases, the state incentives can be combined with the federal incentive program for a $12,500 in savings on the cost of purchasing an EV.
Some of the potential incentives you can get from your state or local government include:
- Grants
- Tax incentives
- Loans and leases
- Rebates
- Exemptions
- Utility discounts
- Discounts on home charging equipment
You should check for your local incentives before purchasing the EV to make sure you know all of your options and the qualification requirements for each of the incentives. While the federal tax credit does not apply when leasing vehicles, some state incentives do. For example, Colorado offers a $2,000 tax credit for the lease of a new EV.
How to Claim the EV State Incentives
Each state has its own EV incentives and process. The incentives and process can vary drastically among states, so be sure to research how to claim the EV state incentive for your state.
How to Claim the California EV Rebate
California offers several incentives, including a $7,000 grant based on income eligibility, a $1,500 California Clean Fuel Reward, discounted charging rates during off-peak hours, rebates for level 2 installation, and free charging for one year based on region.
Due to California EV rebates' high cost and popularity, they installed an income limit of $150,000 for an individual or $300,000 for joint filers. Plug-in hybrids with electric ranges under 35 miles or EVs with a base price above $60,000 are not eligible. The California rebate is cash or a check at the point of sale. A mailed check may take up to 18 months to arrive.
To learn more about the process and apply for a rebate, head to California’s Clean Vehicle Rebate page.
Utility Incentives
Some utility companies and communities also provide EV incentives. You may be able to earn cash back, credits, or a discounted rate plan for purchasing an electric car. Many states, like Arizona, California, and Hawaii have electric companies that offer reduced electricity rates based on the time-of-use for EV owners. Some utilities also offer discounts on home EV charging equipment if you sign up to their programs to share charging data from those devices.
Buying an EV is a great investment for your wallet and our planet. There are many different types of incentives that help reduce the upfront cost of buying an electric vehicle. Make sure to determine the total federal, state, and local incentives that you can qualify for before you purchase an EV using the resources above.
Incentives by State
In the table below, we summarize each state's available rebates, tax credits, and utility incentives when purchasing an electric vehicle.
| State | State Incentives | Utility Incentives |
|---|---|---|
| Alabama | No emissions testing required | Grants for EVSE installation Discounted rate if charging between 9PM - 5AM Plug-In Electric Vehicle (PEV) Charging Rate Incentive |
| Alaska | Discounted charging rate during off-peak hours | |
| Arizona | Reduced Vehicle License Tax and carpool lane access | Reduced electricity rates based on time-of-use |
| Arkansas | No emissions testing required Up to $1,000 tax credit to switch | |
| California | $7,000 grant (based on income eligibility) $1,500 California Clean Fuel Reward | Discounted charging rate during off-peak hours Rebates for Level 2 installation and free charging for one year based on region |
| Colorado | Income tax credit of $2,500 for purchase or conversion; $1,500 for lease No emissions testing required 25% Fuel Reduction Technology Tax Credit | Offers funding for up to 80% of EVSE Up to $35,000 per EVSE |
| Connecticut | Rebate between $500 and $3,000 No emissions testing required Free metered parking in New Haven | Up to $600 rebate for Level 2 EVSE |
| Delaware | UP $3,500 rebate for purchase/lease of BEV, and $1,500 for PHEV New Battery Electric Vehicles Rebate $2,500 | $200 one-time credit and $5/month to not charge during peak hours Up $500 rebate for Level 1 or 2 charger installation |
| Florida | Up $1,000 rebate to purchase/lease a PHEV HOV lane access No emissions testing required | Rebates for EVSE installation |
| Georgia | Eligible for HOV and HOT lanes | Discounted charging rate from 11PM - 7AM Rebate for Level 2 EVSE installation |
| Hawaii | Eligible for HOV lanes No emissions testing required Free parking at state and municipal garages and in metered stalls | Discounted charging rate during off-peak hours $500 rebate for Level 2 EVSE |
| Idaho | No emissions testing required | 50% of project costs, up to $7,500 per site for Level 1 or 2 EVSE |
| Illinois | Reduced registration fee and no emissions testing required | Discounted charging rate during off-peak hours |
| Indiana | No emissions testing required | Discounted charging rate during off-peak hours Indiana & Michigan Power offers a $500 enrollment incentive for off-peak charging |
| Iowa | No emissions testing required | Rebate for Level 2 EVSE Plug-In Electric Vehicle (PEV) Fee |
| Kansas | No emissions testing required | |
| Kentucky | No emissions testing required | |
| Louisiana | Tax credit of 10% of vehicle cost, up to $2,500 No emissions testing required | $250 rebate for Level 2 EVSE |
| Maine | Up to $2,000 rebate | Discounted charging rate during off-peak hours |
| Maryland | One-time tax credit up to $3,000 Eligible for HOV lane | Discounted charging rate during off-peak hours Rebates for Level 2 EVSE and options to lease |
| Massachusetts | No emissions testing required $2,500 rebate for new vehicles with a purchase price under $50,000 | $8/month credit for off-peak hours $250 rebate for Level 2 EVSE Provides grants for 60% of the cost of Level 1 or Level 2 EVSE installed at MUDs, up to $50,000 per street address. |
| Michigan | No emissions testing required | Discounted charging rate during off-peak hours Up to $500 to install Level 2 EVSE |
| Minnesota | No emissions testing required | Discounted charging rate during off-peak hours Free charging from wind energy $500 rebate for Level 2 EVSE |
| Mississippi | No emissions testing required | $250 rebate for Level 2 EVSE |
| Missouri | No emissions testing required; $78.50 annual fee | |
| Montana | No emissions testing required Up to $1,000 tax credit to switch | |
| Nebraska | Lower interest rate loans | Rebates for Level 2 EVSE |
| Nevada | Eligible for HOV lanes No emissions testing required Free metered parking | Discounted charging rate during off-peak hours |
| New Hampshire | $1,000 rebate for purchase/lease | Discounted charging rate during off-peak hours |
| New Jersey | Up to $5,000 rebate on purchase/lease Sales tax and emission testing exemption Discounted tolls | |
| New Mexico | No emissions testing required | |
| New York | Up to $2,000 rebate No emissions testing required Discounted tolls | Discounted charging rate during off-peak hours |
| North Carolina | Discounted charging rate during off-peak hours Rebates for Level 2 EVSE |
|
| North Dakota | ||
| Ohio | No emissions testing required after one-time inspection | Lease program for Level 2 EVSE |
| Oklahoma | 75% cost reduction on alternative fuel vehicle | |
| Oregon | Up to $2,500 rebate to replace or new purchase | Discounted charging rate during off-peak hours $500 rebate for Level 2 EVSE |
| Pennsylvania | Up to $1,500 rebate | Lease program for Level 2 EVSE |
| Rhode Island | Rebates to purchase/lease No emissions testing required | |
| South Carolina | ||
| South Dakota | No emissions testing required | |
| Tennessee | No emissions testing required | $400 rebate for Level 2 EVSE |
| Texas | Rebates to purchase/lease No emissions testing required | Discounted charging rate during off-peak hours Up to 50% off the cost of Level 2 EVSE |
| Utah | $200 rebate for one year | |
| Vermont | Up to $5,000 incentive Low or no interest loans No emissions testing required | Discounted charging rate during off-peak hours depending on region Rebates for Level 2 EVSE installation |
| Virginia | No emissions testing required $2,500 rebate | |
| Washington | Sales tax exemption No emission testing required; $100 registration fee | Tax credit for 50% of costs of home charging installation, up to $1,000 |
| West Virginia | No emissions testing required | Lease program for Level 2 EVSE |
| Wisconsin | No emissions testing required | Discounted charging rate during off-peak hours Alliant Energy is offering a $500 rebate for EV home charging installation |
| Wyoming | No emissions testing required; annual $50 fee | $5,000 rebate for businesses installing EVSE |
Incentives by Electric Vehicle (EV) Model
The federal electric vehicle tax credit (up to $7,500) is based on the vehicle’s assembly and the components of its battery pack.
The federal tax credit only reduces your tax liability. For example, even if a vehicle qualifies for the full $7,500 and you owe $5,000 in taxes, it will only credit the $5,000. You will not receive the rest of the credit of $2,500
Incentives by Plug-in Hybrid (PHEV) Model
If a PHEV meets the same requirements as described above for battery electric vehicles (BEV) and has a pack capacity of more than 7 kWh, it may qualify for the full federal tax credit of $7,500
Used our incentive calculator to find out if the PHEV model that you are considering is among those that qualify.
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