Investing in an EV reaps many benefits for those who can afford to do so. Unfortunately, it’s not as simple as buying an electric car, driving it off the lot, and letting others handle the finances. There’s plenty of information at consumers’ fingertips to get your vehicle and receive every tax credit you are promised. As such, it’s essential to know how to obtain such benefits when you submit the following year’s taxes. 

Deductions vs. Tax Credits 

The first thing you must realize about these credits is what you are getting into. Many people use tax credits and tax deductions interchangeably, but there is a legal difference between the two that NerdWallet helped explain in a recent rundown. The differences may seem slight, but misunderstanding could cost you a great deal. 

Tax credits are not always refundable. Instead, they help you lower your tax bill without necessarily refunding the money. Compare that to deductions, which reduce your applicable income. The difference may seem small, but understanding it is vital to getting the best bang for your electronic vehicle’s buck. 

The jargon, misinformation, and sincere misunderstanding make purchasing an electric vehicle a slippery slope for those who are swayed by the promises without digging deeper into the problem. Luckily for them, plenty of easy-to-digest information puts these rules in layman’s terms for average consumers who struggle with taxes.

How does this apply to my electric vehicle?

Not all electric vehicles are created equal to the IRS. As such, it’s essential to know which vehicles qualify for tax credits and which ones will save on gas and upkeep. There is no universal standard for these tax credits, which are currently capped at $7,500. According to KBB, the credit applies to new hybrid, plug-in hybrid, electric, and fuel-cell vehicles. 

With this in mind, it’s essential to understand the logistics behind EV-specific tax credits, as there’s more to the concept than just buying a car and expecting a credit come tax day. The credit only applies to the first 200,000 vehicles sold, meaning some popular models from Tesla and the Chevy Bolt do not apply – even when they are brand new. 

Furthermore, the credit varies from type to type. PHEV vehicles, for instance, are capped at lower levels. For example, Edmunds notes that the Kia Niro comes with a tax credit of $4,543 instead of $7,500, while the Niro EV gets the full credit. Depending on the circumstances, it’s a big difference, but one that could quickly go wrong when people don’t read the fine print. 

Getting the total tax credit amount

Edmunds ran down which cars are eligible for the total cost on the current market. While Tesla owners typically only get the credit if they order right away, many other options provide users with full refunds because Tesla’s popularity makes the 200,000 car threshold harder to fall under. However, there are still plenty of well-regarded models, including PHEVs, which get the total price. Edmunds and Cars each created an easy-to-follow guide to finding these. 

Audi’s e-Tron SUV and Sportback both get the full credit. The same goes for the Ford Mustang Mach-E, Hyundai Ioniq and Kona electric models, Jaguar I-Pace, Mini Hardtop Electric, Nissan Leaf, Polestar 2, Volkswagen ID.4, Volvo XC40 Recharge, and Porsche Taycan.

PHEV buyers need to study harder, but the Bentley Bentayga Hybrid, BMW X5 xDriver45e, Chrysler Pacifica Hybrid, Jeep Wrangler 4xe, and Polestar 1 all qualify for the full credit. 

It’s important to note that while some models get less money, there’s still a credit. With all of this in mind, it’s up to drivers to figure out which EV or hybrid works for their needs. Otherwise, the cost may leave a lot to be desired.