Thinking about going electric? There is a wealth of government tax incentives that can offset the initial cost of a brand new electric car.
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Electric cars represent the fastest growing automotive segment in North America, with more and more manufacturers rolling out all-electric cars, plug-ins and hybrids to meet growing demand and keep up with changeing driver preferences. Most car buyers these days are aware gas prices aren't going down any time soon, and judging by all the extreme weather and droughts, this global warming thing might actually be for real.
Turning to electric cars is an effective way to counteract these dismal developments, but electric car prices are still out of range for most American budgets. Fortunately, federal and state governments are offering rebates and incentives to help make these important vehicles more affordable.
Federal Tax Incentives For Electric Vehicles
The federal government, in an effort to promote electric vehicles and reduce national gasoline consumption, enacted legislation to entice manufacturers and consumers to produce and purchase all-electric or hybrid electric automobiles. Manufacturing grants were made available for research and development of alternative fuel vehicles and for the investigation of new battery technologies.
Various tax incentives were enacted to influence consumer purchasing decision because all-electric or hybrid vehicles typically cost more than gasoline-fueled vehicles. The Energy Improvement and Extension Act of 2008 provided tax credits for the purchase of qualifying all-electric or hybrid electric vehicles, and the energy provisions of the American Recovery and Reinvestment Act of 2009, which was commonly called the “Stimulus Bill,” provided tax credits for the purchase and installation of certain conversion kits to retrofit a gasoline-fueled vehicle for all-electric operation.
Qualifying Vehicles
Manufacturers must certify the vehicle to the IRS for the tax credit to apply, and there are specific certification requirements.
- The vehicle must be purchased new.
- It must be purchased for use or for lease, not for resale. Leasing companies may claim the credit, but car lots cannot.
- The vehicle has to be driven primarily in the United States.
- The gross vehicle weight rating must be less than 14,000 lbs.
- The battery must have a capacity of 4 kilowatt hours or greater and be rechargeable from an external electrical source.
- The vehicle must be classified as a motor vehicle for purposes of title II of the Clean Air Act.
Manufacturers certify the vehicles to the Internal Revenue Service because the tax incentives are phased. Phase-outs are tied to post-2009 production levels and begin the second calendar quarter after post-2009 production hits 200,000 eligible vehicles. The IRS is monitoring these production levels and will announce the phase-out schedules when they are triggered.
The following list details specific all-electric new vehicle purchases that still qualify for a $7,500 federal tax credit. Phase-outs are set at 50 percent and 25 percent, but the IRS has not yet announced that phase-out periods have been triggered for any of the listed vehicles.
- 2014 BMW i3 Sedan
- 2014 Chevrolet Spark EV
- 2013 Fiat 500e
- 2012 through 2014 Ford Focus EV
- 2012 Mitsubishi i-MiEV
- 2011 through 2013 Nissan LEAF
- 2013 Smart electric drive cabriolet
- 2013 Smart electric drive coupe
- 2012 through 2013 Tesla Model S
- 2012 through 2014 Toyota RAV4 EV
The following list details specific hybrid electric new vehicle purchases that still qualify for the same tax credit. The phase-out rules are the same, and no IRS announcements have been made concerning the triggering of the phase-out periods.
- 2014 BMW i3 Sedan with Range Extender
- 2011 through 2014 Chevrolet Volt
- 2012 Fisker Karma Sedan
- 2013 through 2014 Ford C-Max Energi
- 2013 through 2014 Ford Fusion Energi
- 2014 Honda Accord Plug-in Hybrid
- 2014 Porsche Panamera S E Hybrid
- 2012 through 2014 Toyota Prius Plug-in Hybrid
Required Steps For Claiming The Federal Tax Credit
To claim the tax credit, consumers must fill out and submit IRS Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit. For vehicles acquired for personal use, the credit from 8936 is reported on IRS Form 1040, U.S. Individual Income Tax Return. The credit can be used as a portion of the alternative minimum tax if the vehicle was purchased in 2010 or following years. For vehicles acquired for business use, the credit from 8936 is reported on IRS Form 3800, General Business Credit.
State Incentives
Many states followed the federal government’s example and also offered attractive tax incentives for the purchase of all-electric or electric hybrid vehicles. Some states offer additional privileges as well. Most legislation differentiates between all-electric and hybrid electric vehicles.
Arizona
The State of Arizona offers a $75 tax credit for the installation of an electric vehicle charging station. Reduced license fees are available for electric vehicles, and all-electric vehicles are also permitted to use the HOV lane regardless of the number of passengers.
California
The State of California offers $5,000 tax rebates for the purchase of all-electric vehicles, $3,000 for the purchase of hybrid electric vehicles, and up to $1,500 for electric motorcycles and neighborhood electric vehicles. All-electric vehicles and hybrid electric vehicles are also permitted to use the HOV lane regardless of the number of passengers until 2015.
The City of Los Angeles offers rebates of up to $2,000 for the installation of an electric vehicle charging station in a residence that participates in the Los Angeles Department of Water and Power Residential Time-of-Use Rate program.
Eight counties in California’s Central Valley also offer tax credits for the installation of an electric vehicle charging station in a residence. The City of Sacramento offers free parking with free charging station access for electric vehicles in designated downtown parking garages and lots.
Colorado
The State of Colorado offers a tax credit of $6,000 or 85 percent of the cost, whichever is less, for the purchase of all-electric and hybrid electric vehicles. A 20 percent rebate is available for the installation of an electric vehicle charging station. These incentive phase out between 2010 and 2016, and consumers should check with the Colorado Department of Revenue prior to making a purchasing decision to determine the exact rebate currently available.
Florida
The State of Florida doesn’t offer tax incentives, but electric vehicles are permitted to use HOV lanes regardless of the number of passengers.
Georgia
The State of Georgia offers a tax incentive of $5,000 or 20 percent of the cost, whichever is less, for the purchase of an all-electric or hybrid electric vehicle. Georgia Code 48-7-40.16 also offers $2,500 or 10 percent of the cost, whichever is less, for the installation of an electric vehicle charging station.
Illinois
The State of Illinois offers $4,000 or 80 percent of the cost, whichever is less, to cover the cost difference between the purchase of an electric vehicle over a standard gasoline-fueled vehicle. Conversions to all-electric power are also covered by the same incentive.
Louisiana
The State of Louisiana offers an income tax credit equal to the least of the following options: 50 percent of the cost difference between a standard gasoline-fueled vehicle and its all-electric counterpart, 50 percent of the cost of converting a vehicle to all-electric power, 10 percent of the total cost of the vehicle, or $3,000.
Montana
The State of Montana offers a tax credit of $500 or 50 percent of the cost, whichever is less, for conversion of a gasoline-fueled vehicle to an all-electric model.
New Jersey
The State of New Jersey exempts all-electric vehicles from the state sales tax and allows them to use the HOV lanes regardless of the number of occupants.
Oklahoma
The State of Oklahoma, through Oklahoma Statute 68-2357.22, offers $1,500 or 50 percent of the cost, whichever is less, for the purchase of an all-electric vehicle. Oklahoma also offers a one-time tax credit of 50 percent of the cost of conversion of a gasoline-fueled vehicle to an electric model. This tax credit will expire in 2015.
Oregon
The State of Oregon offers a tax credit of $750 or 25 percent of the cost, whichever is less, for the purchase and installing an electric vehicle charging station.
South Carolina
The State of South Carolina offers $1,500 or 20 percent of the federal tax credit, whichever is less, for the purchase of all-electric or hybrid electric vehicles.
Tennessee
The State of Tennessee offers rebates of up to $2,500 for the purchase of a Chevrolet Volt or a Nissan LEAF, but rebates are only available for the first 1,000 buyers. Consumers should contact the appropriate state agency to verify the program’s current status.
Utah
The State of Utah offers an income tax credit of up to $750 for the purchase of a hybrid electric vehicle and up to $2,500 for the conversion of a vehicle to all-electric power.
Get the lowest price quotes on electric vehicles eligible for tax incentives!
Please note that tax laws change frequently. All tax incentives should be verifies prior to making any purchasing decision base in whole or in part upon the offered incentives.