New Federal Qualified Plug-In Electric Drive Motor Vehicle Credit
Are you considering purchasing an electric vehicle in 2022? If so, there may be a generous federal tax credit available to you. Certain qualified vehicles purchased after December 31, 2009 may offer up to a $7,500 tax credit to eligible taxpayers. The amount of the credit you receive will vary based on the capacity of the battery used to power the vehicle. To find out if a vehicle you are looking to purchase is eligible for the credit, please contact our office or visit https://www.fueleconomy.gov/feg/taxevb.shtml.
Here are a few points to further explain how the credit works:
- The credit is non-refundable. This means that if the credit reduces your federal tax liability below zero, you will not get the excess credit refunded to you. There may be some tax planning strategies to implement that will help you take full advantage of the credit. If you are considering purchasing an electric vehicle, we recommend contacting our office to consult with one of our accountants.
- The credit is only good in the year the qualified vehicle is purchased. It cannot be carried forward or backward to offset taxes in future or prior years.
- This credit is for new vehicles only. However, if used correctly, this credit can create a situation where a new vehicle is actually cheaper than a lightly driven vehicle of the same model.
- This credit is for owners only. Unfortunately, if you lease a new electric vehicle, you will not be eligible for the credit.
- The credit begins to phase out for a manufacturer’s vehicles when at least 200,000 qualifying vehicles manufactured by that manufacturer have been sold for use in the United States. For that reason, Tesla and GM vehicles are not eligible for the credit.
You may be questioning what tax incentives are available at the state level. When it comes to state tax incentives, New Jersey has some of the most generous electric vehicle programs in the country:
- Charge Up New Jersey: Rebates for Electric Vehicle Purchase or Lease.
- You may receive an incentive of up to $5,000 when you purchase or lease a new battery electric or plug-in hybrid electric vehicle in New Jersey. The amount of the incentive depends on the MSRP of the vehicle. Your dealer will submit the application on your behalf and the incentive will instantly be applied to the cost of your new vehicle, if you are found eligible. Please note that the terms of this program change annually and availability of program funds is limited. At this present time, the 2022 incentive program has not yet been announced or started and there are currently no incentives available yet for 2022. If you would like to learn more, please contact our office or visit https://chargeup.njcleanenergy.com/.
- Zero Emission Vehicle (ZEV) Tax Exemption.
- Zero Emission Vehicles are exempt from NJ state sales tax, so you’ll save 6.625% on the sale, lease or rental of a new or used battery electric vehicle. However, this exemption does not apply to plug-in hybrid electric vehicles. As an example, if you purchased an electric vehicle for $52,000, the sales tax exemption would save you $3,445.
- EZ Pass Green Pass Discount on Garden State Parkway and New Jersey Turnpike Tolls.
- Electric vehicles are qualified to receive reduced toll rates via the Green Pass Discount through their EZ Pass accounts: 10% discount on the off-peak rate for the New Jersey Turnpike and Garden State Parkway. Customers must enroll in the plan and provide proof of eligibility.
- HOV Lane Access.
- Electric vehicles can drive in the HOV lanes, regardless of the number of passengers in the vehicle.
As you can see, there may be more benefits to purchasing an electric vehicle other than being climate-conscious. There is a generous federal tax credit available as well as many incentives offered by the state. When combined, you may be able to save thousands of dollars on your income taxes by purchasing a qualified electric vehicle. If you are considering purchasing an electric vehicle, please reach out to us. We would be glad to help further explain the credit or calculate how the credit may benefit you. We commend your efforts to reduce emissions and protect our environment. As always, it is our pleasure to make your life less taxing!