The Complete Guide to the Best Electric Vehicle Incentives

Electric vehicles (EVs) have taken the world by storm in the last few years. However, because the technology is relatively new, EVs tend to have a high price tag. Incentives can lower the upfront cost of electric cars, making it easier for drivers to afford them.

One of the best electric car incentives is the $7,500 federal EV tax credit, but not all cars qualify for the discount. 

We’ll explain everything you need to know about the EV tax credit and provide information about state and utility EV incentives available in your area.

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How much is the federal EV tax credit worth?

If the car’s battery meets necessary battery requirements, you can receive a tax credit of either $3,750 or $7,500 when purchasing a qualifying vehicle. 

The total value of the tax credit depends on two key battery factors:

1. If the vehicle’s battery meets critical mineral requirements and

2. If the vehicle’s battery meets battery component requirements

If the vehicle meets one of these battery criteria and other eligibility factors, you can earn a $3,750 credit. The electric car will earn a $7,500 tax credit if it meets both battery requirements.

Not all electric cars are eligible for the federal tax credit. Much like the tax credit for purchasing solar, the Inflation Reduction Act revamped the qualifications for the EV tax credit. 

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How to qualify for the EV tax credit

Five main factors impact an electric car’s eligibility for the federal tax credit, including the taxpayer’s income, the car’s MSRP, where the vehicle was assembled, vehicle size, and battery requirements. 

• Taxpayer income and status: A taxpayer’s modified adjusted gross income for the current or prior year must be $300,000 or less for joint filers, $225,000 or less for head-of-household filers, and $150,000 or less for all other filers. 

• MSRP limit: The MSRP of electric pickup trucks, vans, or SUVs cannot exceed $80,000. All other passenger vehicles must have an MSRP of $55,000 or less. EVs exceeding these MSRP limits are not eligible for the tax credit. 

• Assembly location: The vehicle's final assembly must occur in North America. The vehicle identification number (VIN) can tell where a car was assembled.

• Vehicle requirements: Eligible new clean vehicles must weigh less than 14,000 pounds, have at least a 7 kWh battery, and must have been placed in service on January 1, 2023, or later. 

• Battery requirements: EV batteries must meet critical mineral sourcing and battery component requirements for the full $7,500 tax credit. A partial credit of $3,750 is earned if only one is met.

You will receive the full or partial tax credit if your vehicle checks off the above. When filing for the EV tax credit, you’ll need a time of sale report (a seller report) that provides information like the dealer name, address, VIN, and the car’s make and model. 

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What cars are eligible for the federal EV tax credit?

Electric vehicles from Acura, Cadillac, Chevrolet, Ford, Honda, Nissan, Rivian, Tesla, and Volkswagen are eligible for the federal EV tax credit. The following table outlines what fully electric car models qualify for the federal tax credit:

^{*Not every version of each model will qualify. Verify with the car dealer for eligibility of your specific car.}

^{**Eligible year varies with variant.} 

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How much money can you save with the federal EV incentive?

The federal EV tax credit is the best incentive for those planning to purchase an EV in 2024. The table below shows popular electric vehicles eligible for the full $7,500 credit and how much they cost before and after the credit is applied. 

EV make and model	Est. starting MSRP	Est. cost after tax credit
2023 - 2024 Cadillac Lyriq	$58,590	$51,090
2023 Chevy Bolt	$26,500	$19,000
2023 Chevy Bolt EUV	$27,800	$20,300
2024 Chevy Equinox	$41,900	$34,400
2024 Tesla Model 3 (Performance and Long Range AWD)	$47,740, $54,990	$40,240, $47,490
2024 Tesla Model Y (Performance, Long Range AWD, Long Range RWD)	$44,990, $51,490	$37,490, $43,990
2024 Tesla Model X AWD	$77,990	$70,490

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Is there a tax credit for used EVs?

Yes! Pre-owned all-electric, plug-in hybrid, or fuel cell electric vehicles purchased on or after January 1, 2023, may be eligible for a federal tax credit.

The credit equals 30% of the sale price up to $4,000. To qualify for this incentive, you must:

• Be an individual who bought the vehicle for use and not for resale.

• Not be the original owner.

• Not claimed as a dependent on another person’s tax return.

• Not have claimed another used clean vehicle credit within 3 years before the purchase date.

• Have an aggregated gross income that does not exceed $150,000 for married filing jointly, $112,500 for heads of households, and $75,000 for all other filers.

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What state-wide EV incentives are available?

In addition to the tax credit, which is available across the United States, some states have also jumped on the bandwagon to offer additional incentives to those who own electric vehicles. 

Connecticut Hydrogen and Electric Automobile Purchase Rebate (CHEAPR)

How it works: Connecticut residents who purchase or lease an eligible vehicle from a licensed  dealership can receive a standard rebate depending on what kind of vehicle they purchase; the current offerings are:

• $4,250 for an eligible new battery electric vehicle

• $2,250 for a plug-in hybrid electric vehicle

• $7,500 for a fuel cell electric vehicle

The CHEAPR program extended its incentive in 2023 by introducing Rebate+ New and Rebate+ Used. Qualifying individuals can receive an additional rebate for new or used vehicles at the time of purchase. When combined with the standard rebate, vehicle owners can receive up to $9,500!

Colorado Electric Vehicle Tax Credit

How it works: Much like the federal EV tax credit, taxpayers in Colorado can recieve a state tax credit of $5,000 for the purchase or lease of a new EV or plug-in hybrid vehicle with an MSRP of up to $80,000 on or after July 1st, 2023.

For leases, the agreement must have an initial term of at least two years. Also, beginning January 1st, 2024, Coloradans who purchase an EV with an MSRP up to $35,000 will be eligible for an additional $2,500 tax credit. 

New York Drive Clean Rebate

How it works: New York state offers a point-of-sale rebate towards the purchase or lease of a new electric or plug-in hybrid car. The rebate you receive will depend on how much battery-only range the car has. Offers for different EPA ranges include:

• 200+ miles: $2,000

• 40-199 miles: $1,000 

• 40 miles or less: $500

Also, if the EV you purchase has an MSRP greater than $42,000, you will receive a $500 rebate. 

Drive EV Rhode Island

How it works: Through the Drive EV Rhode Island incentive program, residents can receive a one-time rebate when they purchase or lease a new EV, fuel-cell EV, or plug-in hybrid vehicle. Qualifying vehicles must be purchased from a licensed Rhode Island dealer or a qualified out-of-state dealership. 

New vehicles purchased or leased can receive a rebate of up to $1,500 and $1,000 for plug-in hybrids. When applying, residents must submit the following:

• Valid Rhode Island registration certificate

• Final sales or lease agreement, including an itemization of credits, discounts, and incentives received (if applicable)

• A Rhode Island driver's license

• Signed W-9 form

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Is buying an EV worth it for you?

There are plenty of benefits to owning an electric vehicle, including less maintenance and lowering your carbon footprint.

Although most EVs have a higher price tag than traditional vehicles, the long-term costs are significantly lower. Fueling a gas car is substantially more expensive than charging an EV, and with fewer maintenance requirements, you also have lower maintenance costs.

Pairing your EV with solar panels can increase your savings even further. Thanks to a 30% tax credit and higher-than-ever electric prices, solar panels are an attractive investment in most scenarios. When you use solar to charge an EV, you’re not only saving the planet, you’re also saving money.

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