Along with their positive impacts on the environment, electric cars can pad your wallet. If you’re asking yourself “Is there a tax credit for electric cars?” outside of saving on fuel costs, there is. Take advantage of an electric car tax credit for eco-friendly drivers. Read on to find out how your electric car can potentially earn you more money this tax season!
How does the electric vehicle tax credit work?
The spirit of the electric card tax credit was to get more electric cars on the road and minimize the environmental impact of fuel-emission vehicles. The deal was to offer a tax credit to the vehicle owners of the first 200,000 qualified electric vehicles that a manufacturer puts on the road.
All electric vehicle owners aren’t eligible for the tax credit, though. It only applies to the original owner of the vehicle. This means that your used vehicle and your leased vehicle don’t qualify since they were or are owned by someone else. If you bought your electric vehicle from the dealership, though, you can take advantage of this tax credit.
Once you’ve calculated how much you owe the IRS this tax season, this tax credit can be applied to reduce how much you owe, sometimes all the way down to $0.
How much is the electric car tax credit?
The amount of your electric car tax credit depends on the make and model of the vehicle and the capacity of the battery used to power it.
For vehicles purchased after December 31, 2009, the total credit available is $7,500. The first part of that is a $2,500 standard credit and the second is based on battery usage. If the battery has a capacity of at least 5-kilowatt hours and uses propulsion energy to power the vehicle, another $417 is credited. After that, another $417 is credited for each kilowatt hour of battery capacity over 5.
The Department of Energy has compiled a list of qualified electric vehicles and their maximum tax credit.
Be aware that there are also many states with incentives for eco-conscious drivers. By leveraging both state and federal programs, your tax credits can prove substantial.
Why are some credits worth more than others?
The original tax agreement was to provide credits to the first 200,000 electric vehicle car owners of a given manufacturer. After that, the idea was that the economic advantages of driving an eco-friendly car would allow those tax credits to decrease and eventually go away.
Take Tesla for example. They were first to sell 200,000 qualified electric vehicles in July 2018 so their phase-out began the first day of 2019. Vehicles delivered from January 1 – June 30, 2019, are eligible for half the maximum tax credit. It cuts in half again for vehicles delivered between July and the end of 2019 and no cars receive a federal tax credit starting in 2020.
How TaxSlayer can help file your electric vehicle tax credit
There are many different factors that go into whether you are eligible for tax credits for electric cars. If you qualify, there are even more factors that go into determining how much your credit is. To make sure that you get it right and save the most on your taxes, collect all documentation that you have and file your taxes with TaxSlayer. Our team of tax professionals can help you review your information and our suite of products submits everything that you need for your electric car tax credit.