How Does the Federal Tax Credit for Electric Cars Work?

Volvo is a leader among automotive innovators. From cutting-edge safety technology to clean energy, Volvo works hard to offer vehicles that will help you feel comfortable and confident while commuting from Garfield Township to Interlochen. Along with that peace of mind, you can gain a generous tax credit when you buy an electric vehicle from Volvo! But how does the federal tax credit for electric cars work? 

At Serra Volvo Cars of Traverse City, you can secure a $7,500 tax credit when you buy a Volvo C40 Recharge, a Volvo XC40 Recharge, or any other eligible vehicle! Volvo models qualify for this electric car tax rebate, unlike other popular EVs like Tesla, so you can reduce your emissions and spending all in one! If you're eager to travel through Kalkaska while enjoying a Michigan EV tax credit, read on with us below!

Which Models are Applicable for this Electric Car Tax Credit?

Whenever the federal electric car tax is mentioned, it comes across as if every EV purchase qualifies for this program. While this is a common perception, it is completely false. To earn the federal EV tax credit, you must buy a new EV after December 31, 2009. Your qualifying EV must also meet the following criteria:

• Draws propulsion using a traction battery that has at least 5 kilowatt-hours (kWh) of capacity
• Uses an external source of energy to recharge the battery
• Has a gross vehicle weight rating (GVWR) of up to 14,000 pounds
• Meets specified emission standards 
• Has to be mostly driven in the United States

The following tool can be used to estimate the cost of your EV upgrade once the tax credit has been applied. If you're considering a plug-in hybrid EV, you'll need to purchase from a select group of manufacturers in order to secure the full tax credit. These models must have a battery pack rated for at least 4 kWh of energy storage and can be recharged from an external source. If you're interested in a Michigan EV tax credit, reimbursements are available for home charging stations and more!

Am I Eligible for the Federal Electric Car Tax Credit? 

Once you've found a model you love that's eligible for the federal EV tax credit, you'll need to determine if the credit can be applied to your taxes. It's important to note that the tax credit is only available if you buy the vehicle, if you lease, the credit will go to the lending institution that technically owns the vehicle. 

After you decide to buy your EV, you'll need to consider what you owe in income tax for that year. This figure is key since it caps how much of the tax credit you can receive. For example, if you buy an EV that's worthy of the full $7,500 EV tax credit, but you only owe $3,000 in taxes, you'll only earn $3,000 worth of the credit. The same is true if the vehicle only qualifies for $1,500 worth of credit. In that case, you'll only earn $1,500 to apply to your taxes. You can only earn the full EV tax credit amount if you owe at least $7,500 in income tax for the year you bought the EV. 

Finally, you'll want to remember that the tax credit is non-transferable. That means you can't sell your vehicle to another driver and allow them to use the tax credit. Only the registered, original owner can claim the tax credit. Keep this in mind if you're considering a pre-owned EV!

How Long Will the Federal Electric Car Tax Credit Be Available?

As previously mentioned, not all EVs are eligible for the federal tax credit program. This is because eligibility is revoked once a manufacturer has sold 200,000 eligible plug-in electric models or EVs. After that point, the credit will phase out after the second quarter. Due to this limit, your ability to access a generous tax credit is time sensitive. That said, certain automakers like General Motors and Tesla have already lost eligibility, which is worth keeping in mind when setting your budget! You can view the full list of qualifying manufacturers from the IRS to plan for your purchase. 

Save on a Volvo EV Today in Traverse City! 

Now that you know the answer to "How does the federal tax credit for electric cars work?" shop with our Volvo dealership in Traverse City to save big! You can also contact our team to learn about your ability to claim even further financial compensation through local Michigan EV tax credits! Still doing your Volvo research? Explore the Volvo XC90 price or the Volvo S60 reviews!