What are the tax benefits of buying an electric vehicle? 

Aside from producing no pollution and freeing you from gas station lines and prices, electric vehicles (EVs) in Orange County, reward you with tax benefits to make them cheaper to buy as long as you qualify. Here’s what to expect from the dealers at the Beach Boulevard of Cars in Huntington Beach.

What Qualifies

For you to receive a credit on your federal income tax, your vehicle must meet the following requirements:

• Be new and for your own use in the US and not for resale.
• Include a battery that has 7 kilowatt hours (kWh) of capacity or more. The battery and other components must also meet certain requirements.
• A Gross Vehicle Weight Rating (GVWR) of well under 14,000 lbs.
• Be produced by a qualified manufacturer. 
• Go through final assembly in North America.
• Must have a Manufacturer Suggested Retail Price (MSRP) of under $80,000 for SUVs, pickup trucks, and vans or under $55,000 for other vehicles.

The easiest way to find out if a vehicle qualifies is to ask your dealer or check Federal Tax Credits.

Who Qualifies

To ensure you qualify for the credit your Adjusted Gross Income (AGI) must not be more than:

• $300,000 for married couples filing jointly.
• $225,000 for heads of households.
• $150,000 for others.

You can use the AGI from the year your vehicle was delivered or the year before, whichever is lower. The maximum credit you receive is what you owe in taxes and you cannot apply the credit to future tax bills.

To get the credit, the dealer has to report your name and taxpayer ID, which is normally your Social Security Number, to the IRS. You claim the credit by filing Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit (Including Qualified Two-Wheeled Plug-in Electric Vehicles.

Benefits

If you bought a new plug-in EV on April 18, 2023, or after, you can get a credit of up to $7,500 on your federal income tax:

• $3,750 if the vehicle meets the critical minerals requirement only.
• $3,750 if the vehicle meets the battery components requirement only.
• $7,500 if the EV meets both.

Tax Benefits for Used EVs

For qualified used EVs, you can also get a tax credit equaling 30 percent of the sale price with the maximum credit of $4,000. As with new EVs, some qualifications apply.

• The vehicle must be for your use, primarily in the US, and not for resale. It must cost $25,000 or less, including all costs and fees imposed by the dealer, but not including fees required by the law, such as title and registration.
• The GVWR must be under 14,000 and have a battery capacity of more than 7 kWh.
• Your modified AGI must be $150,000 or less if you’re married filing jointly, $112,500 for a head of household, or $75,000 for another filer.

Other Credits

Other government entities may offer incentives when you buy any EV. For example, California’s Clean Vehicle Rebate Program closed in November 2023. The Los Angeles Department of Water and Power still offers a used EV rebate for those residing in its service area. These incentives come and go, depending on their budgets. Your best source of information is your dealer.