Incentives to Own an Electric Vehicle

Whether you are looking to purchase your first electric vehicle (EV), your next EV, or electric vehicle supply equipment (EVSE) for your home, the United States has incentives, rebates, grants, and programs to help. The federal government, state governments, and even local utilities have special incentives to help anyone who is interested in joining the over 2 million Americans who already own EVs. Here’s what you need to know about some of the most popular programs.

Among the federal government’s incentives for drivers, you can find tax breaks for both new and used EVs that are in place until the end of 2032. Beginning in 2024, the consumer clean vehicle tax credits can be available at the point of sale by transferring your credit to the dealership. 

Good for a tax credit of up to $7,500, the federal government’s Clean Vehicle Credit has certain requirements that both the vehicle buyer and the vehicle itself have to meet in order to be eligible.  

A quick rundown of vehicle criteria for EVs purchased in 2023 or later: 

• Must be for your own personal or business use, not for resale. 
• Must be used primarily in the US. 
• Must have a gross vehicle weight rating of less than 14,000 lbs. 
• Must have undergone final assembly in North America. 
• Must not exceed a manufacturer suggested retail price (MSRP) of: 
  • $80,000 for vans, sport utility vehicles (SUVs), crossovers, and pickup trucks
  • $55,000 for all other vehicle types.  
• The EV or Plug-In Hybrid EV (PHEV) must have an external charging source. (Note that PHEVs cannot use DC fast chargers.)

A certain percentage of the value of the battery’s critical minerals must be either extracted or processed in the US or in a country that has a free-trade agreement with the US; or the battery must be recycled within North America. In 2023, 40% of the critical minerals must be extracted or processed in the US, with a 10% increase every year until ending at the 80% mark in 2027. 

In addition, a certain percentage of the value of the vehicle battery’s components must be manufactured or assembled in North America. In 2023, that number is 50%, and then it increases to 60% for 2024 and 2025. From 2026-2029, the minimum battery component requirement increases 10% each year.  

Finally, the EV buyer’s modified adjusted gross income (AGI) may not exceed: 

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

You can use the lesser of your modified AGI from the year you take delivery of the vehicle or the year before. As long as your modified AGI is below the threshold in one of the two years, you can claim the credit. 

If you are in the market for a used EV, the federal government also has the Used Clean Vehicle Credit that comes with its own set of requirements.   

Here are the requirements for the used EV: 

• Must have a sale price of $25,000 or less. 
• Must have a model year at least two years prior to the calendar year when you buy it. 
• Cannot have already been transferred after August 16, 2022 to a qualified buyer. 
• Must have a gross vehicle weight rating of less than 14,000 lbs.
• Must an eligible Fuel Cell Vehicle or plug-in EV with a battery capacity of least 7 kWh. 
• Must be used for driving primarily in the United States. 
• Must be sold by a licensed dealer. 

Here are the requirements for the driver:  

• Must have bought the used EV for yourself, not for resale. 
• Must not be the original owner of the EV. 
• Must not be claimed as a dependent on another person’s tax return. 
• Must not have claimed another Used Clean Vehicle Credit in the three years prior to the purchase date. 
• Modified AGI may not exceed: 
  • $150,000 for married people filing jointly, or a surviving spouse, 
  • $112,500 for heads of households, 
  • $75,000 for all other tax filers. 

You may use the lesser amount of your modified AGI from the year that you take delivery of the vehicle, or the year before. If your income is below the threshold for one of those two years, you can claim the credit. 

If you purchase an EV, you will likely receive a Level 1 charging cable with your vehicle. These trickle chargers at an average of 5 miles per charging hour by plugging into a standard 110 volt electrical socket. 

Many EV drivers find that a Level 1 cable is too slow for daily use, so they choose to upgrade to a residential Level 2 EV charger. Luckily, the federal EV charging station tax credit can be used for the purchase of EV supply equipment for residential homes and businesses. 

This tax credit, which runs from now to the end of 2032, can be used for either residential homes or the installation of EVSE at businesses. It works differently depending on whether it is being claimed by a corporation for business purposes or by an individual for home use. 

For home chargers, the Alternative Fuel Vehicle Refueling Property Credit is worth a tax credit of 30% of the cost of the EVSE up to $1,000.  

A quick rundown of the qualifying refueling property for residential installations: 

• Refueling property (the charger) must be used to store or dispense clean-burning fuel. (Electricity in this case.) 
• The refueling property is placed in service during the tax year. 
• The original use of the property began with the taxpayer. 
• The property is used primarily inside the United States. 
• If the property is not used for business or investment purposes, it must be installed on property used as a main home. 
• The EVSE must be installed within low-income communities or non-urban census tracts. 

The credit can be used for EVSE that is used to charge two- and three-wheeled vehicles (which operate on public roads) and bi-directional chargers. 

In addition to federal tax incentives for purchasing both new and used EVs, each individual state has its own tax incentives for EV buyers.  

The Alternative Fuels Data Center has a database of all current state laws and tax incentives for EVs from state governments, state utility providers, and any other organization within a state that provides any type of funding for EVs or EV-related infrastructure. Here are some examples of state EV tax credits. 

In Colorado, qualified light-duty EVs purchased or leased before Jan. 1, 2029 that are titled and registered in that state are eligible for the Colorado Electric Vehicle Tax Credit. The amount of the credit depends on whether the vehicle was purchased or leased, and what tax year the buyer claims the credit for.  

For a purchased light-duty EV, the Colorado state tax credit is: 

• $2,000 if purchased before July 1, 2023 
• $5,000 if purchased July 1, 2023 – December 31, 2024 
• $3,500 if purchased in 2025 
• $1,500 if purchased in 2026 
• $1,000 if purchased in 2027 
• $500 if purchased in 2028 

Maryland has the Electric Vehicle and Fuel Cell Electric Vehicle Tax Credit.  

This excise tax credit is good for up to $3,000, is first-come, first-served, and is limited to one vehicle per individual and 10 vehicles per business entity.  

According to the Alternative Fuels Data Center, qualified vehicles: 

• Must have a total purchase price not exceeding $50,000. 
• Must be propelled to a significant extent by an electric motor that draws electricity from a battery with a capacity of at least 4 kWh. 
• Must not have been modified from original manufacturer specifications. 
• Must be purchased and titled for the first time between July 1, 2023 and July 1, 2027. 

Utah has the Qualified Heavy-Duty Alternative Fuel Vehicle Tax Credit, which is good for $12,000 for 2023 and decreases each year until 2030 when it will be worth $1,500.  

At least 50% of the qualified vehicle’s miles must be driven in the state. 

If you are in the market for an EV or EVSE for your home, it’s never been easier to find incentives to help you make these purchases.