If you're interested in buying or leasing an electric car, here’s what you need to know about available incentives.
Plug-in electric cars qualify for a federal income tax credit of up to $7,500. The full amount of the tax credit depends on the battery size of the vehicle. If you buy the car in one year, you get the credit when you file your 1040 with the Internal Revenue Service (IRS) for that tax year. We say “up to” $7,500 because the credit is limited by your tax liability. If you owe $7,500 or more, you can take the full credit. If you owe less, say $5,000, you can take a credit on what you owe. The IRS will not write you a check.
This tax credit is available to car purchasers only. If you lease a car, the leasing company gets the tax credit, which is why several dealers are offering attractive leasing options. They are passing at least some of the value of the tax credit onto the terms of the lease.
You should know that the federal tax credits are going to be reduced and phased out for each manufacturer when that company sells 200,000 units in America. After that carmakers sell 200,000 EVs, the tax credit for that carmaker will stay fully in place for 3 months, then cut in half for 6 months, then cut in half again for 6 months, and then it expires.
Both Tesla and GM (maker of Buick, Cadillac, GMC, and Chevrolet) have sold over 200,000 EVs and have had their tax credit phased out. Of the car manufacturers in our program, Nissan is next in line to hit the 200,000-car-mark, but that's not in danger of happening any time soon. You can find a good summary of where each car manufacturer stands here.
Keep that in mind as you decide on which vehicle to buy or lease. It's an important consideration if you're waiting a few years to buy or if you prefer to lease now and buy later, with an eye towards getting an electric vehicle that is even better than what’s available today. We can expect quality improvements and several more choices by 2020, but it's anyone's guess at what an electric car will cost then and what federal incentives will be available.Learn more from energy.gov