To determine if you are eligible for an electric vehicle tax credit, you may need degrees in political science and finance. It is not simple. Make, model, price, the state in which you reside, your income, and much more are included. And the government perpetually modifies requirements and regulations. But once you’ve sorted everything out, you can save thousands of dollars—even on a Tesla TSLA.
The IRS clarified last week the rules for “transferring” the EV purchase tax credit from purchasers to dealers for vehicles placed in service after this year. A customer who qualifies for the $7,500 federal tax credit on a Tesla (TSLA) in 2024 will receive $7,500 off the purchase price instead of a tax refund. The dealer, not the consumer, will be responsible for collecting the credit.
The purchaser transferred the tax credit to the dealer. This is why the IRS refers to it as transferring.
Nonetheless, credit is not a given. Buyers must be qualified. Requirements include an annual household income of no more than $300,000 and a vehicle that meets the credit’s pricing and country of origin restrictions. These requirements are subject to alter over time.
Even if a buyer has a household income of over $300,000, lacks a degree in finance, and still desires a six-figure EV, such as a $100,000-plus Lucid (LCID) Air or Tesla Model S Plaid Edition, there is a method to obtain a credit: Rent it.
Buying and leasing a vehicle are nearly equivalent. Owners argue that purchasing is less expensive in the long run, particularly if they intend to drive the vehicle for many years. On the other hand, as a vehicle ages, maintenance costs usually increase.
All else being equal, the primary advantage of leasing is lower monthly payments, because the leasing company possesses the vehicle and realizes its value by selling it at the end of the lease.
In addition to the $7,500 federal tax credit, there are numerous state-level benefits. California purchasers, for example, may be eligible for an additional $7,500 off. The total potential savings amount to $15,000, with the federal government contributing $7,500 and the state contributing $7,500.
Here is an actual example: An entry-level Model 3 costs approximately $39,000. A California purchaser who is eligible for the $15,000 in state and federal rebates would pay $24,000 before tax, title, and destination fees.
In addition, California offers qualified purchasers a $2,000 EV charging card, which provides $2,000 in free charging at public EV chargers. Now, the price of the Model 3 is $22,000. The average cost of a new car in the United States is approximately $48,000.
However, not all state savings are located on the West Coast. Connecticut offers a $2,250 discount on the purchase price of a new Tesla or other EV model. It functions similarly to the federal tax credit next year.
State credits and federal eligibility are subject to change, of course. Buyers must do their research. Inquire with their dealers.
