In my most efficient vehicles, cheapest new vehicles, and cheapest electric vehicles articles, I highlighted a few electric vehicles (e.g. Chevy Bolt, Chevy Bolt EUV, and Nissan Leaf) that have prices that rival the cheapest gas-powered vehicles for sale in the U.S. market. But, a key component of that reduced cost is the U.S. federal tax credit of $7,500 knocking the net price down from upper $20K MSRP range down to the low $20K MSRP range.
What can push those and other electric or plug-in hybrid vehicles down to even lower levels are additional state-level plug-in hybrid (PHEV) and electric vehicle tax credits, rebates, and incentives on top of the federal tax credit. This article will break down all of those state-level PHEV and EV incentives – and currently 14 states have some version of a significant credit or rebate. First, let’s recap the federal electric vehicle tax credit and which vehicles (and taxpayers) are eligible for it. Here’s everything that we’ll cover in this article:
Federal Electric Vehicle Tax Credit (Pre-Inflation Reduction Act)
Pre-Inflation Reduction Act going into effect at the beginning of 2023, federal electric clean vehicle tax credits (a must-read for anyone looking to purchase an electric vehicle) were very straightforward at the federal level. Almost every electric vehicle sold in the U.S. market was eligible for the credit (up to $7,500), provided that it met some fairly basic criteria. The credit amount was $2,917 for a vehicle with a battery capacity of at least 5 kilowatt hours (kWh), plus $417 for each kWh of capacity over 5 kWh (up to $7,500 max credit) – making almost every battery electric vehicle (BEV), fuel cell electric vehicle (FCEV), and plug-in hybrid electric vehicles (PHEV) qualified for at least a portion of that credit.
The only sticking point (and it starting becoming an increasingly big one), was that once automakers hit 200,000 vehicles sold in the U.S. market, credits for their vehicles began to phase out. GM and Tesla hit that mark a few years ago, and Toyota hit it in Q2 of 2022 (in Q4 of 2022, Toyota vehicles were only eligible for 50% of the full credit amount). You can see more details on the previous electric vehicle tax credit requirements and a list of eligible vehicles at the Fueleconomy.gov electric vehicle tax credit site.
2023 Federal Electric Vehicle Tax Credits, Post Inflation Reduction Act
The Inflation Reduction Act (signed in 2022 and started in 2023) made a number of key changes to the PHEV and electric vehicle federal tax credits. The 5 biggest changes are:
- Major vehicle requirement changes:
- have a battery capacity of at least 7 kilowatt hours.
- be made by a qualified manufacturer.
- have final vehicle assembly in North America.
- meet certain battery and minerals sourcing criteria (not enforced at the moment, but likely starting in March).
- have a maximum vehicle MSRP of $80,000 for vans, sport utility vehicles and pickup trucks and $55,000 for other vehicles.
- No more automaker vehicles sold phaseouts.
- Taxpayer modified adjusted gross income (MAGI) eligibility caps were added.
- Used Vehicles are now potentially eligible for a tax credit as well.
- Starting in 2024, dealerships will be able to offer the value of a tax credit up front to consumers.
The “final vehicle assembly in North America” and battery and minerals sourcing criteria are going to dramatically impact which electric vehicles are eligible for the full $7,500 clean vehicle tax credit. It’s very possible that most, if not all, of the current EVs available for sale in the U.S. market won’t meet the battery and minerals requirements now or in the near future until their supply chains can adjust. The IRS has said that it needs more time to provide guidance on which vehicles are eligible for the full credit based on these requirements. They specifically state that “This proposed guidance is expected to be issued in March 2023.”
In other words, before running out to buy an electric vehicle, make sure that you’ve done your homework (the “must read article” I highlighted above should help, but is really just a starting point, as everything is going to be a moving target the next few years).
Where & How to Claim a State Electric Vehicle Tax Credit
It’s good to know all of the details included in this article for your state (and federally), but all of the best tax software and even cheapest ways to e-file will have versions of their product that will walk you through both federal and state electric vehicle tax credit eligibility and the claim process. Here’s some best-available partner discounts (automatically applied when clicking below links) for them:
- H&R Block
- Cash App Taxes (formerly “Credit Karma Tax”, now owned by Square/Cash App)
A State-by-State List of Electric Vehicle Tax Credits, Rebates, & Incentives
On top of the electric vehicle tax credit, a number of states have hybrid and electric vehicle tax credits, rebates, and incentives. I’ll highlight what I was able to dig up for 2022 and 2023, but you will need to do some further digging and check with your state to make sure these incentives still apply, as they change frequently, and often depend on state funding per year (first-come, first-serve). Some states have run out of funding early or mid-year in the past, so it’s important to do your homework prior to purchase, not after. If your state is not listed, my research came up empty. If I missed something in your state, let me know and I’ll add it.
California electric vehicle rebates are available through the Clean Vehicle Rebate Project (CVRP) for the purchase or lease of qualified vehicles, which include eligible zero-emission plug-in hybrid, battery EV, and fuel cell light-duty vehicles. They’ve also increased the standard rebate for households that are below federal poverty guideline levels. Below is a summary, but check out their full guidelines for more details.
|Vehicle Type:||Standard Rebate Amount:||Increased Rebate Amount (for low income):||Total Rebate Amount (for low income):|
|Plug-In Hybrid Electric Vehicle (PHEV)||$1,000||$5,500||$6,500|
|Battery Electric Vehicle (BEV)||$2,000||$5,500||$6,500|
|Fuel Cell Electric Vehicle (FCEV)||$4,500||$3,000||$7,500|
Colorado’s electric vehicle tax credits have been extended with a phaseout in place for purchases of electric vehicles in the following years:
- light duty passenger vehicle: $2,500 for purchase, $1,500 for lease
- light duty electric truck: $3,500 for purchase, $1,750 for lease
- medium duty electric truck: $5,000 for purchase, $2,500 for lease
- heavy duty electric truck: $10,000 for purchase, $5,000 for lease
- light duty passenger vehicle: $2,000 for purchase, $1,500 for lease
- light duty electric truck: $2,800 for purchase, $1,750 for lease
- medium duty electric truck: $4,000 for purchase, $2,500 for lease
- heavy duty electric truck: $8,000 for purchase, $5,000 for lease
More info can be found here.
The state of Connecticut’s Hydrogen and Electric Automobile Purchase Rebate (CHEAPR) program offers vehicle rebates for Connecticut residents who purchase or lease a new eligible electric, fuel cell electric, or plug-in hybrid electric vehicle – up to a maximum MSRP of $50,000. They also have added credit amounts (called “Rebates+”) for those who meet lower income criteria. See the full FAQ for more details. Funds are limited and all funds are allocated on a first-come, first-serve basis, in the following amounts:
|Vehicle Type:||CHEAPR Standard Rebate Amount:||Rebate+ Additional Rebate for New Vehicles Amount (for low income):||Rebate+ Used Vehicles Amount (for low income):|
|Plug-In Hybrid Electric Vehicle (PHEV)||$750||$1,500||$1,125|
|Battery Electric Vehicle (BEV)||$2,250||$2,000||$3,000|
|Fuel Cell Electric Vehicle (FCEV)||$7,500||$2,000||$7,500|
The state of Delaware is offering electric vehicle cash rebates totaling up to $2,500 depending on vehicle type. The program was extended through April 30, 2023. The rebate must be applied for within 90 days of the purchase date. Total purchase price cannot exceed $60,000.
Rebate amounts are as follows:
|Vehicle Type:||Rebate Amount:|
|New Battery Electric Vehicles (including vehicles with gasoline range extenders)||$2,500|
|New Plug-in Hybrid Electric Vehicles (note specifics)||$1,000|
|New Dedicated Propane or Natural Gas Vehicles||$1,500|
|New Bi-Fuel Propane or Natural Gas Vehicles||$1,350|
The Illinois Electric Vehicle Rebate Program (funded by the Illinois Environmental Protection Agency) is making rebates available for Illinois residents that purchase a new or used all-electric vehicle from an Illinois licensed dealer in the following amounts.
- $4,000 rebate for the purchase of an all-electric vehicle that is not an electric motorcycle.
- $1,500 rebate for the purchase of an all-electric motorcycle.
It appears that funding/applications are currently on pause, but may restart if new funding becomes available. See the FAQs here for more info.
Maine offers electric vehicle tax rebates based on your income level and whether the vehicle is all-electric, plug-in, and new or used. MSRP caps apply. Vehicles must be purchased or leased on or after August 29, 2019, and prior to the date of the Program’s termination, as noticed to Participating Dealers and on the Efficiency Maine website, or December 31, 2023, whichever comes first.
The standard rebates for all income levels are:
- New EV: $1,000
- New PHEV: $500
Enhanced rebates for qualified moderate income levels (see eligibility rules) are:
- New EV: $3,500
- New PHEV: $2,000
Enhanced rebates for qualified low income levels (see eligibility rules) are:
- New EV: $7,500
- New PHEV: $3,000
- Used EV or PHEV: $2,500
There are also rebates available for businesses, organizations, governmental entities, tribal governments, select non-profits, and business fleets. See the details for more info.
Effective 7/1/23 – 6/30/27, Maryland is offering an excise tax credit on a qualifying zero-emission plug-in electric or fuel cell electric vehicle regardless of whether you own or lease the vehicle. Business entities may also qualify for the tax credit on up to ten vehicles. Subject to available funding, a credit is allowed for the purchase of a zero-emission plug-in electric or fuel cell electric vehicle. The credit may not exceed $3,000. Credit amount allowed is:
- $1,000 for a 2-wheeled, zero emission plug in electric drive or fuel cell electric motorcycle.
- $2,000 for a 3-wheeled, zero emission plug in electric drive or fuel cell electric motorcycle.
- $3,000 for a zero-emission plug in electric drive or fuel cell electric vehicle.
- The vehicle must be made by a manufacturer primarily for use on public streets, roads, and highways.
- The vehicle cannot be modified from the manufacturer’s specifications.
- The vehicle must be a new vehicle and titled for the first time on or after July 1, 2023, but before July 1, 2027.
- The vehicle must be acquired for use or lease by the taxpayer, and not for resale.
- The vehicle has a battery capacity of at least 5 kilowatt-hours, or if a motorcycle or auto cycle, has a battery capacity of at least 4.0 kilowatt-hours (applies only to plug-in electric)
- The vehicle has a base purchase price not exceeding $50,000.
The Massachusetts Department of Energy Resources has a program called Massachusetts Offers Rebates for Electric Vehicles (MOR-EV), which offers rebates for the purchase or lease of new electric vehicles, including battery and fuel-cell electric vehicles and up to $1,500 for plug-in hybrid electric vehicles.
- For MOR-EV applications submitted on or after November 10, 2022, for vehicles purchased or leased prior to that date, rebates for eligible battery electric or fuel cell vehicles with a sales price of $50,000 or less will be $3,500.
- Eligible battery electric or fuel cell vehicles with a sales price of $55,000 or less and with a purchase or lease date on or after November 10, 2022 may qualify for the $3500 rebate.
New Jersey is offering up to a $4,000 rebate for new electric vehicles (must be ordered, purchased or leased after July 25, 2022) with a MSRP under $55,000.
Also, zero-emission vehicles sold, rented, or leased in New Jersey are exempt from state sales and use tax. This exemption is not applicable to partial zero emission vehicles, including hybrid electric vehicles. The definition of “sale” in the law includes rentals and leases. The exemption is applicable to the sale, rental or lease of a new or used zero emission motor vehicle on and after May 1, 2004.
The New Jersey DOT has more info.
New York offers tax rebates for new electric vehicles, in the following amounts:
- Range: > 200 miles: $2,000
- Range: 40 to 199 miles: $1,000
- Range: <40 miles: $500
- Electric vehicles > $42,000 MSRP: $500
Oregon’s electric vehicle rebates for vehicles with an MSRP below $50,000 are:
- $2,500 towards the purchase or lease of a new plug-in hybrid electric vehicle or battery electric vehicle with a battery capacity of 10 kWh or more.
- $1,500 towards the purchase or lease of a new plug-in hybrid electric vehicle or battery electric vehicle with a battery capacity of less than 10 kWh.
- $750 towards the purchase or lease of a zero-emission electric motorcycle.
Additionally, starting in 2022 there was an increased income-based “Charge Ahead” rebate:
Charge Ahead Rebate for the purchase or lease of a new or used battery electric or plug-in hybrid electric vehicle. To qualify for the Charge Ahead rebate, the purchaser or lessee must be from a low- or moderate-income household. For purchases or leases prior to Jan 1, 2021, the income requirements vary by where you live in Oregon and are based on household size. For purchases on or after Jan 1, 2021, the income requirement is up to 400% of the federal poverty guideline.
For the Charge Ahead rebate option:
- On or after Jan. 1, 2022: $5,000 towards the purchase or lease of a new or used battery electric or plug-in hybrid electric vehicle.
- Prior to Jan. 1, 2022: $2,500 towards the purchase or lease of a new or used battery electric or plug-in hybrid electric vehicle. Standard and Charge Ahead Rebates can be combined for up to $7,500 toward the purchase or lease of a new, eligible vehicle.
More info here.
Pennsylvania offers rebates for new and used electric vehicles with final purchase price of $50,000 or less (purchase or lease) for the following amounts:
- Battery electric vehicle: $2,000
- Plug-in hybrid (PHEV) cars and trucks: $1,500
- All other alternative fuel vehicles, and electric motorcycles: $500
An additional $1,000 is available to applicants who meet low-income requirements. For details, see Alternative Fuel Vehicle Rebate Guidelines.
Rhode Island’s DRIVE EV Rebate program is offering the following rebates for vehicles purchased on or after 7/7/22:
- Purchase or lease of new battery electric vehicles and fuel-cell electric vehicles (at or below $60,000 price): up to $2,500.00
- Purchase or lease of new plug-in hybrid electric vehicles (PHEVs) (at or below $60,000 price): up to $1,500.00
- Purchase or lease of used battery electric vehicles and fuel-cell electric vehicles (at or below $40,000 price): up to $1,500.00
- Purchase or lease of used plug-in hybrid electric vehicles (PHEVs) (at or below $40,000 price): up to $750.00
An additional rebate of up to $2,000 is available to applicants that participate in a state or federal income-qualified program (see DRIVE+). Rebates are awarded on a first-come, first-served basis.
In 2022, Texas offered a $2,500 rebate for EVs purchased through end of the year. Only vehicles purchased on or after September 1, 2021 from a dealer licensed to sell or lease vehicles in Texas were eligible. Review the notice of rebates and eligible vehicles for additional eligibility criteria. It’s not clear whether this program will return for 2023.
Vermont relaunched its electric vehicle incentives a few years ago for both used and new electric vehicles, with modified adjusted gross income (MAGI) limitations. To summarize:
- Used EVs, hybrids, and PHEVs: low and moderate income car buyers may be eligible for an incentive covering 25% of the upfront cost of a used high efficiency vehicle, up to $5,000. Vehicles must have an efficiency of 40 miles per gallon or higher. This includes many hybrid, plug-in hybrid and all-electric vehicles. More info at MileageSmartVT.org.
- New EVs and PHEVs: there are limited approved funds for tax credits up to $4,000 for new EVs and PHEVs for the following income levels and vehicle types:
|Tax Filing Status:||Adjusted Gross Income (AGI) Limits for Enhanced and Standard Incentives:||Plug-in Hybrid Electric Vehicle (PHEV) Rebate Amount:||All-Battery Electric Vehicle (BEV) Rebate Amount:|
|Individual Filing as Single or Head of Household||$50,000 or less||$3,000||$4,000|
|Individual Filing as Single or Head of Household||$50,001 up to $100,000||$1,500||$2,500|
|Married Filing Jointly||$75,000 or less||$3,000||$4,000|
|Married Filing Jointly||$75,001 up to $125,000||$1,500||$2,500|
|Married Filing Separately||$50,000 or less||$3,000||$4,000|
|Married Filing Separately||$50,001 up to $100,000||$1,500||$2,500|
|Individual Filing as Qualifying Widower||$75,000 or less||$3,000||$4,000|
|Individual Filing as Qualifying Widower||$75,001 up to $125,000||$1,500||$2,500|
More details can be found here.
Don’t Forget About the Improved Federal Energy Tax Credits & New Energy Rebates
Also don’t forget about the new federal energy tax credits and rebates. There are significant updates that resulted from the Inflation Reduction Act available (including solar panels, electrical panels, battery storage, and EV charging) that could make the prospect of electric vehicle ownership an even bigger cost-saving venture. The linked-to article is a complete guide to the 2 improved energy tax credits and 2 new energy rebates available to Americans.
PHEV & Electric Vehicle State Tax Credit Discussion
If you live in one of these states are these incentives, matched with the federal credit enough to make you consider a PHEV or electric vehicle purchase?
Let me know if I missed any states above!