2022 Electric Vehicle Tax Credits: Which EVs & Hybrids Qualify?

1. What is the Electric Vehicle Tax Credit?
2. Does the Electric Car Tax Credit Expire? 
3. Government Rebates for Electric Vehicles
4. Government Rebates for Plug-in Hybrid EVs
5. How to Claim the Electric Vehicle Tax Credit
6. Are There Tax Credits From States or Other Sources?
7. Are Electric Vehicles 100% Tax Deductible?
8. Frequently Asked Questions

If you purchased a new all-electric vehicle (EV) or plug-in hybrid electric vehicle (PHEV) during or after 2010, you may be eligible for a federal income tax credit of up to $7,500, according to the U.S. Department of Energy. The total federal incentive amount depends on the capacity of the battery used to power your car, and state and/or local incentives may also apply. See if your car qualifies for the 2021 electric vehicle tax credit, learn about the eligibility requirements, and how to claim the credit.

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What is the Electric Vehicle Tax Credit?

Currently, the plug-in electric drive vehicle tax credit is up to $7,500 for qualifying and eligible vehicles. This is a combination of the base amount of $4,000 plus $3,500, if the battery pack is at least 40 kWh.

There is, of course, fine print for the EV tax incentive:

• The car must be purchased as a new electric vehicle.
• Only the original buyer of a qualified electric vehicle or plug-in hybrid vehicle can claim the federal tax credit.
• The vehicle must not be ethanol, diesel, or fuel-cell.
• The federal tax credit isn’t applicable if you plan on buying an electric vehicle just to resell it.
• The vehicle must be primarily used in the U.S.
• To be eligible for the maximum credit of $7,500, plug-in and battery-powered electric vehicles must be built by qualified manufacturers.
• Leased vehicles do not qualify for the federal tax credit since the credit is often already factored into the cost of the lease.
• Battery-powered electric vehicles and plug-in hybrids must have battery packs that are capable of being recharged from an external source and are rated for at least 4 kWh of energy storage.
• The IRS reserves the right to reject federal EV tax credit claims.

Most plug-in vehicles and hybrids qualify for a federal tax credit between $3,500 and $6,300, though some makes and models qualify for the full $7,500 tax credit (see table below). 

Proposed Plans for the EV Tax Credit 

President Biden is looking to expand the federal tax credit in the coming years and the White House has introduced two bills to expand EV adoption. One of those bills is the Build Back Better Act which would increase the existing federal EV incentive to $12,500.

If passed, individuals could qualify for the additional $5,000 if:

• Your EV was made in the US with a union workforce ($4,500)
• At least 50% of the battery components in your EV are made in the US ($500)

Does the Electric Car Tax Credit Expire? 

Yes, the EV federal tax credit expires after a manufacturer sells 200,000 total qualifying vehicles. This is called a "phase out."

Once that happens, the EV tax credit gets cut in half in the second calendar quarter to $3,750 and will continue to lower after an automaker reaches the 200,000-car threshold until the end of the third calendar quarter.

This cycle continues for the next two quarters to $1,875 until the allowable credit is $0 one full year later or four calendar quarters after the phase out begins.

Currently the GMC Hummer EV and Teslas are no longer eligible for the tax credit.

Are Any Other Manufacturers Close to Having the Credit Phase Out?

No, we’re still several years away before the next closest manufacturer reaches the 200,000-vehicle threshold. Nissan is next in line to hit the threshold, and with introduction of the all-electric Ariya SUV last year, its timeline may be accelerated.

Government Rebates for Electric Vehicles

*Last updated May 16, 2022

Government Rebates for Plug-in Hybrid EVs

*Last updated May 16, 2022

How to Claim the Electric Vehicle Tax Credit

If you qualify for the EV tax credit you must apply for it when filing your taxes for the year you purchased the car. So, if you purchased a car in June of 2021, you’d apply for the credit at the beginning of 2022 when filing your 2021 taxes.

To claim this credit, you’ll need to fill out:

• IRS Form 8936 for qualifying EVs and PHEVs purchased for personal use
• IRS Form 3800 for qualifying EVs and PHEVs purchased for business use

This credit can be used toward the alternative minimum tax (AMT) for vehicles purchased in 2010 and later.

Are There Tax Credits From States or Other Sources?

Along with the federal EV tax credit, your state may have additional incentives for purchasing plug-ins and other alternative fuel vehicles. Many states provide at least 10 program options since states can enjoy tax reliefs or rebates for these types of vehicles.

Though incentives vary by state, in most cases, they can be combined for a $10,000 savings on the out-of-pocket cost of purchasing an EV.

For example:

• In California, drivers can qualify for a $2,000-$4,500 rebate on top of any federal credit received or a $5,000 grant (based on income).
• In New York, residents can receive either a $500 or $2,000 rebate based on the MSRP of the EV purchased.

Check your state’s local incentives to ensure you’re aware of your options and the additional perks that may be available to you. Each state also has its own process for receiving these incentives, so you’ll want to research which steps you’ll need to take to claim them. 

Are Electric Vehicles 100% Tax Deductible?