Between rising gas prices and environmental impact, electric cars are becoming more popular, but some drivers may be hesitant to buy one because of the cost. Thankfully, incentives and other advantages are available for those who switch to electric vehicles.
In this post, we’ll explore the different types of benefits available for electric car owners. We'll also discuss the tax credits that are available for those who make the switch to electric.
So if you're considering buying an electric car, read on to learn:
EV FEDERAL TAX CREDIT*
When considering whether to purchase an electric vehicle (EV), one important factor is the tax credit. As of 2022, the federal tax credit is $7,500 for purchasing an electric car.
For tax purposes, this credit is applied to reduce the taxes owed in the year you purchased the vehicle. If your tax bill is less than $7,500, the credit will be used to bring your balance to $0. This means that the actual value of the tax credit will vary depending on an individual's tax liability.
But the tax credit for electric cars is just one factor to consider when deciding whether to purchase an electric vehicle.
What happens to the tax credit if you’re leasing an EV?
As you’ve learned, the federal electric car tax credit helps offset the costs of electric vehicles. Unfortunately, if you’re leasing an electric vehicle, you won’t be the one receiving the discount; whoever is offering the lease will receive the credit.
However, you may be able to take advantage of other electric car incentives, such as state and local tax credits or rebates. Also, there’s a potential that the tax credit is taken off the lease price of the car at the time of the agreement.
These programs can help offset the cost of electric vehicles, making them more affordable for everyone.
What vehicles qualify for the federal tax credit?
To be eligible for the credit, a car must:
- Have four wheels
- Weigh no more than 14,000 pounds
- Have a battery that provides 4 kilowatt-hours (kWh) or more power
- Be charged from an external source — in other words, a plug
So what vehicles qualify? In general, all-electric vehicles and plug-in hybrids qualify for the federal tax credit. However, traditional hybrids (without a plug) do not qualify.
In addition, the IRS doesn't want to give credit on a used car, so they’ve also stipulated that the car must be purchased after 2010.
If you’re thinking of buying an electric car, be sure to check whether it meets the criteria above for the electric car tax credit.
ADVANTAGES OF GOING ELECTRIC
Purchasing an electric vehicle has plenty of benefits other than the tax incentives; some you know about and some you may not.
- You’re using more eco-friendly transportation. By using an electric car, you're not releasing harmful gasses into the air, since gas and diesel-burning vehicles release a number of air pollutants (including CO2).
In fact, according to the EPA, a typical passenger vehicle emits about 4.6 metric tons of carbon dioxide per year.
- You can drive farther with an electric car on a single charge than with a gas car on a full tank. No longer will you need to stress on those long cross-country trips or even have to plan weekly fill-ups during your work commutes.
- You don't have to worry about tune-ups with an electric vehicle nearly as often as you would with a gas-powered car.
Between fewer fluids, less brake wear, fewer moving parts, and more electronics (versus a conventional engine), your electric car simply doesn’t need to be in the shop as often as your conventional vehicle.
As you can see, making the switch to an electric vehicle can ultimately save you time and money in the long run.
DISADVANTAGES OF GOING ELECTRIC
When it comes to EVs, there are also some negatives to consider.
- The initial purchase price can be higher than a comparable gasoline-powered vehicle. Between the modern technology (namely the lithium-ion batteries) and other modern electronics, there is certainly a higher initial cost for the driver.
However, when you consider the tax credit and other potential benefits above (such as no gas and fewer maintenance costs), you might find the purchase price is well worth it.
- EVs typically have less resale value than their gasoline car counterparts. This is due to changing technology and market demands.
According to a study by ISeeCars.com, during a 3-year span, the average electric car generally depreciates by 52%, compared to 39% for a gas-powered sedan or SUV and 34% for a gas-powered truck.
- Charging time and cost can also be a disadvantage for some, as it can take longer to charge an EV than to refuel a gasoline car.
Electricity costs can vary depending on the time of day and location, but many drivers have opted to install charging stations at home to account for this.
As with any vehicle, the right choice ultimately depends on your requirements and priorities. You’ve seen both the benefits and downfalls of owning an electric vehicle, so weigh these for your own personal needs.
*We recommend you seek advice from a tax professional to determine if you qualify for any tax credits.
And if you need help finding the best car insurance coverage for your EV, start by speaking to a SimplyIOA agent at 833.872.4467 or get an auto insurance quote online now.