If you’ve been thinking about trading in your gas-guzzler for an eco-friendly, electric car, 2023 may be the year to do it. Thanks to changes in the federal tax credit for electric vehicles, there are now more incentives than ever to make the switch to electric.
What Is the Federal Tax Credit?
The federal tax credit for electric cars is designed to encourage more drivers to choose electric and hybrid vehicles. For electric cars purchased in 2023, it offers up to $7,500 back on your taxes, depending on the make and model. This tax credit lowers the upfront cost of buying electric, making these cars more accessible to the average driver.
New Electric Cars: Score Up to $7,500 Off
The headline news is you can now subtract a hefty $7,500 right off the sticker price of a new electric vehicle purchase in 2023. That slashes what you pay at the dealership significantly.
However, not every make and model qualifies for the full $7,500 amount. The actual credit varies based on:
- The electric vehicle’s battery capacity and efficiency
- The manufacturer’s overall electric vehicle sales
Once an auto brand sells over 200,000 total electric cars, their credits start phasing down over the next year. So Tesla and GM credits are smaller, while most other car companies still offer maximum discounts.
Always check the official credit amount on your desired model at FuelEconomy.gov before negotiating the transaction. Knowing the exact incentive helps you negotiate a better real-world price.
Used Electric Cars Get Up to $4,000
There’s also great news for shoppers open to pre-owned electrics: a credit up to $4,000 applies on used clean vehicle purchases too.
To qualify, the pre-owned electric vehicle must:
- Cost below $25,000 before applying credit
- Be at least 2 years old from when first sold new
- Have a battery capacity of 7+ kilowatt-hours
Buying a 3-5 year old used EV can already net big saving versus new. Add this credit on top, and the savings possibilities get even sweeter.
What About Income Limits?
One catch to getting the full tax credit is your adjusted gross income cannot exceed:
- $150,000 for single filers
- $225,000 if head of household
- $300,000 for married couples filing jointly
Higher earners see credits reduced and eventually eliminated by certain income thresholds. Check your last tax return and IRS rules to estimate the credit you’ll receive based on income.
Power Up Savings in 2023
With boosted federal tax credits in place this year, make 2023 the 12 months to finally buy into electric vehicle savings. Determine the credits available on desired makes and models, then use them to negotiate the best possible deal.
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