Tax Credits and Rebates for Plug-In Cars Made Easy

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To help get plug-in vehicles to the streets, federal and native governments have introduced?incentives than can shave 1000s of dollars off?the price of purchasing or leasing?one.

The incentives are available in two forms: tax credits and rebates.

Anyone investing in a new plug-in hybrid or battery electric car – collectively called plug-in electric vehicles or PEVs – is eligible for a?federal tax credit.

State and native credits and rebates, however, aren’t available everywhere. Details about them could be spotty, and since programs are inclined to politics and budgetary issues, funding could be reduced or eliminated without warning.

Well-trained salespeople are?usually up to date on plug-in vehicle incentives. Although not all dealerships that sell plug-in electric vehicles have knowledgeable staffers. That complaint was raised repeatedly by consumers inside a 2014?PEV shopping study conducted by the University of California, Davis.

Here’s what you need to know to make sense of everything.

Federal aid

The federal?program is rather simple. The federal government offers?an income tax credit of up to $7,500 towards the first legal, registered owner of a qualifying new plug-in electric vehicle within the tax year in which it was purchased.

The credit is determined by the vehicle’s battery size and all-electric range, so most battery-electric vehicles, or BEVs, entitled to the maximum of $7,500. Plug-in hybrids, or PHEVs, more often than not qualify for less simply because they normally have smaller batteries with?less all-electric range.?By publication, the utmost credits readily available for various plug-in hybrids vary from a low of $3,793 for that BMW i8 to a a lot of $7,500 for the Chevrolet Volt. (Tax credits for fuel cell vehicles can be more – the Toyota Mirai currently rates a credit of up to $8,000.)

And since the amount is a credit against taxes owed and not a set rebate, your?total federal income tax bill determines the ultimate?value.

For example, if you purchase a plug-in electric vehicle having a maximum federal tax credit of $7,500 as well as your total tax bill that year is $8,000, you will get the full advantage of the $7,500 credit (and owe $500). But if your tax bill is $6,200, you’ll be able to claim only a $6,200 credit. The government won’t give back a cheque for the remaining $1,300 and you can’t carry it to the next year.

If you lease, the credit goes?to the leasing company. But to encourage individuals to lease plug-in electric vehicles, leasing companies, that are usually of the automakers, often?apply the rebate towards the lease. That reduces your monthly obligations and sometimes cuts the deposit that many leases require.

You can find the maximum credit for models you’re considering?on the federal Energy Department’s tax credits site.

When does it expire?

The full-value tax credits expire for?each plug-in electric vehicle manufacturer when it has sold?200,000 qualifying cars. Then there’s a one-year period of quarterly reductions until that manufacturer’s plug-in vehicles no longer be eligible for a any federal assistance.

None from the automakers are close to hitting the limit. Vehicle, which sells two plug-in hybrids and something battery-electric vehicle, had become the first to cross the 100,000 mark captured. Tesla Motors who has sold near to 100,000 between?its Model S and Model X battery-electric vehicles. It might be also the first to hit the limit because it ramps up manufacture of its upcoming Model 3,?for which it has taken nearly 400,000 advance reservations.

State incentives

This could change, but as of now, only 12 states offer financial incentives to purchasers and lessees of plug-in vehicles. Five states that accustomed to offer incentives -?Georgia, Illinois, Oregon, Tennessee and Texas -?have canceled their programs. Several states have also added special fees for battery-electric vehicle proprietors to help offset the loss of gas tax revenue used to maintain state highways.

The good news for plug-in electric vehicle shoppers is that where they are available, local and state incentives are in accessory for the government tax credit. Here’s a summary of the 12 states and the maximum incentives they currently offer (actual incentive might be less, based on cost of car):

States’ incentives for plug-in vehicles

State Maximum incentive
California $2,500 rebates for battery-electric vehicles and $1,500 for plug-in hybrids, but special provisions for low-income purchasers and lessees can increase a rebate by up to $1,500. Fuel-cell cars may qualify for a $5,000 rebate.
Colorado $5,000 tax credit; lessees wake up to $2,500
Connecticut $3,000 rebate
Delaware $2,200 rebate
Louisiana $1,500 tax credit (rises to $3,000 in 2018)
Maryland $3,000 tax credit (expiring June 30, 2017)
Massachusetts $2,500 rebate
New York $2,000 rebate
Pennsylvania $2,000 rebate
Rhode Island $2,500 rebate
Utah $1,500 tax credit
West Virginia $7,500 tax credit

Unless otherwise noted, the programs are funded on a calendar- or fiscal-year basis and may run out of money.

Some states offer cash rebates or tax credits for installing home electric-vehicle?charging stations. Others provide incentives such as?florida sales tax and license fee reductions, free parking, toll-road fee waivers and single-occupant utilization of carpool lanes. In a few states, communities and public utility companies offer cash incentives.

The most up-to-date lists of frequently changing local and state plug-in electric vehicle incentives are maintained by the National Conference of State Legislatures and the nonprofit advocacy organization Plug In America.

John O’Dell is a longtime automotive writer who has covered alternative-fuel cars for the La Times and Edmunds.com. He now runs the web site?The Green Car Guy. Email:[email protected]

Updated Jan. 26, 2017.