Financial Incentives for Electric Cars
There are a ton of benefits in getting an EV: better fuel efficiency, lower running costs, fewer maintenance costs, and special incentives.
Whether you are talking about the higher fuel economy of a plug-in hybrid car, or zero emissions vehicles such as all-electric cars, the added technology used in EVs comes at a price. Green cars generally have higher manufacturer suggested retail prices, or MSRPs, than most gasoline vehicles. This is mostly due to the high cost of the battery packs. However, because of all the environmental and societal benefits EVs have, the federal government has provided a solution to help drive adoption of EVs by providing financial incentives that lower their overall cost.
Eligible EV buyers can receive rebates, tax credits, exemptions or driving perks when they purchase or lease an EV. These incentives are offered at all levels of government (federal, state, local) and even by certain companies or agencies, such as utility companies and air quality management districts.
Explore the specific incentives you qualify for using our GreenCars EV Incentives Calculator.
Federal EV Tax Credit
One of the best-known incentives is from the federal government, which offers up to $7,500 off the MSRP of eligible vehicles. The best part about incentives is that you can save even more. For instance, if the starting MSRP of a 2022 Nissan LEAF is $27,800 and you qualify for a $2,000 incentive that was offered by your state, city, and local utility, you could be entitled to a total savings of $9,500 off of your vehicle purchase — that’s a brand-new Nissan LEAF for under $20,000!
As more and more electric cars hit the roads, the cost to produce them will continue to drop. The price of battery packs is also dropping. It is estimated that it will cost the same to buy a new electric car, hybrid, or plug-in hybrid as it will to purchase a traditional gasoline-powered car by 2024.
What is the EV Tax Credit?
This federal tax credit is given to people who purchase a brand-new plug-in hybrid, or all-electric car. The amount of the credit you will receive depends on the make and model of vehicle and can be claimed on your taxes for the year that you purchased your EV. In August 2022, Congress passed new legislation – the Inflation Reduction Act of 2022 – which changes credit amounts and eligibility requirements for clean energy vehicles, including electric vehicles and plug-in hybrids.
Under the new provisions, up to $7,500 is available for new electric vehicles , and there is now a credit of up to $4,000 for used electric vehicles, which can make buying an EV even more affordable for some drivers. However, price caps are in place: passenger cars priced at over $55,000 and vans, trucks, and SUVs priced at over $80,000 are no longer eligible for credits.
Under the new Act, only vehicles whose final assembly is completed in North America qualify for clean energy vehicle credits. This means that many vehicles that previously qualified for clean energy incentives are no longer eligible.
Further complicating the issue is that some models are built in multiple locations, meaning some vehicles of the same nameplate meet the final assembly requirement, while others do not. The Department of Energy has a list of model year 2022 and early model year 2023 electric vehicles that may meet the final assembly requirement here (https://afdc.energy.gov/laws/inflation-reduction-act).
State and Local Incentives
Besides the federal incentive, there are many state and local incentives, rebates, and cash back offers for green cars. To find out more about your local incentives, visit the U.S. Department of Energy’s Alternative Fuels Data Center at https://afdc.energy.gov/laws/search
The world of electric cars is growing fast. In 2021, 3.47 percent of new auto registrations in America were EVs. There were over ten million EVs on the road in 2021 and California leads the highest adoption rate at 35.3 percent and also has the most charging stations followed by New York, Florida, and Texas.