Federal Tax Credits for Electric and Plug-In Hybrids | 2021 GUIDE

federal tax credits for ev's

Today in 2021, electric, and plug-in hybrid cars are taking over the roads. From just a few years ago, the amount of ‘livable” EV’s there are is far greater.

While buying one is still on average, more expensive than their gasoline counterparts, the government can assist.

The federal government started to incentivize people to buy plug-in and fully electric vehicles more than a decade ago. Today, the program is more popular than ever before.

While this all sounds GREAT, many potential buyers are still confused about federal and state tax credits. Which vehicles are eligible, how much is the credit, how does the electric car tax credit work, etc.

I wrote this post to address some of the most common questions about EV and PHEV tax credits available today.

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How do Federal Tax Credits for EV's & PHEV's work

The federal government offers the biggest tax incentives to prospective EV buyers. If you buy a fully electric car, you can expect a credit of $7,500 going towards you tax bill. Vehicles that have been on the market for quite some times will start to get a “phased out” tax credit going from $7,500 to $3,750, $1,875, and then $0. 

Car manufacturers such as Chevrolet and Tesla have become ineligible for Federal Tax Credits. Oddly enough, Nissan with thousands of EV’s sold since 2010 continues to get the full $7,500 tax credit on its new Leaf models.

Below is the most recent eligibility list for 2021 (first quarter).

Latest Federal Tax Credit Electric Vehicles (2021 Update)

ELECTRIC VEHICLES FULL CREDIT PHASE OUT 50% PHASE OUT 25%
2020-2021 Audi e-Tron Sportback
$7500
2019-2021 Audi e-Tron
$7500
2020-2021 BMW i3 & Range Extended
$7500
2021 Chevrolet Bolt EUV
$7500
2020-2021 Chevrolet Bolt EV
$7500
2019 Fiat 500e
$7500
2020-2021 Hyundai Ioniq Electric
$7500
2020-2021 Hyundai Kona Electric
$7500
2020-2021 Jaguar i-Pace
$7500
2020-2021 Kia Niro EV
$7500
2021 Kia Soul EV
$7500
2020-2021 Nissan Leaf & Leaf Plus
$7500
2020-2021 Porsche Taycan
$7500
2020-2021 Volkswagen eGolf
$7500
2021 Volvo XC40 Recharge
$7500

Latest Federal Tax Credit Plug-In Hybrid Vehicles (2021 Update)

PLUG-IN HYBRID VEHICLES FULL CREDIT PHASE OUT 50% PHASE OUT 25%
2020-2021 Audi A8L PHEV
$6712
2020-2021 Audi Q5 PHEV
$6712
2021 Audi A7 PHEV
$6712
2021 BMW 330e & 330e xDrive
$5836
2020-2021 BMW 530e & 530e xDrive
$5836
2020-2021 BMW 745e
$5836
2021 BMW X5 xDrive45e
$7500
2020-2021 BMW X3 xDrive30e
$5836
2019-2020 BMW i8 Coupe & Roadster
$5669
2020 Bentley Bentayga PHEV
$7500
2020-2021 Ferrari SF90
$3501
2020-2021 Chrysler Pacifica Hybrid
$7500
2021 Jeep Wrangler PHEV
$7500
2020 Ford Fusion Energi
$4609
2020-2021 Lincoln Aviator Grand Touring
$6534
2021 Lincoln Corsair Reserve Grand Touring PHEV
$6843
2020-2021 Ford Escape PHEV
$6843
2018-2019 Honda Clarity PHEV
$7500
2020-2021 Hyundai Ioniq PHEV
$4543
2020-2021 Land Rover Range Rover PHEV
$6295
2020-2021 Land Rover Range Rover Sport PHEV
$6295
2020 Karma Revero & Revero GT
$7500
2020-2021 Kia Niro PHEV
$4543
2020 Kia Optima PHEV
$4919
2020 Mercedes GLC350e 4M EQ
$6462
2020 Mercedes S560e EQ PHEV
$4460
MINI Cooper S E Countryman ALL4
$5002
2018-2019 Mitsubishi Outlander PHEV
$6587
2020 Polestar 1
$7500
2020 Porsche Cayenne e-Hybrid & e-Hybrid Coupe
$6712
2020 Porsche Panamera e-Hybrid
$6712
2020-2021 Subaru Crosstrek Hybrid
$4502
2020-2021 Toyota Prius Prime
$4502
2021 Toyota RAV4 Prime
$7500
2020-2021 Volvo S60 Hybrid T8 Inscription
$5419
2020-2021 Volvo S90 Hybrid T8 Inscription
$5419
2020-2021 Volvo V70 PHEV
$5419
2020-2021 Volvo XC60 Hybrid T8
$5419
2020-2021 Volvo XC90 Hybrid T8
$5419

What about STATE rebates?

If you take advantage of tax incentives offered by the federal government, you are way ahead of many other people out there. Believe it or not, but not everyone gets these credits. They either forget, or aren’t even aware these exist.

The icing on the cake is on top of federal incentives, certain states in the union offer rebates for EV purchases and leases. While the list of states is small, it’s better than nothing. Here are the 8 states that offer rebates based on certain criteria being met.

New York

The state offers a $500 rebate for EV’s over $60,000 and $2,000 under $60,000. WAIT… that’s not all. You get the $2,000 if the vehicle gets over 120 miles of EPA rated range. $1,700 if the range is 40-119 miles and $1,100 if range is 20-39 miles.

Oregon

This state offers a $2,500 rebate for a purchase or lease of an EV or PHEV that has a battery capacity of 10kWh or more. Vehicles that don’t meet those requirements (less than 10kWh) only get $1,500.

Massachusetts

Similar to Oregon, this state offers rebates of up to $2,500 for electric vehicles under $60,000 or $1,500 for plug-in hybrids under $60,000. Anything over $60,000 can still land you about $1,000.

California

In California, you qualify for $2,500 for both PHEV an EV’s. Unlike the states mentioned above, in California there’s an income cap that can disqualify you. The cap is:

  • $150,000 for singles
  • $204,000 for head of household
  • $300,000 for married

Maryland

The great thing about Maryland is that you can get rebates for not only EV and PHEV’s, but also for EV chargers and  installations (40% off) or up to $700. Vehicle rebates apply to any vehicle under $60,000 MSRP.

Delaware

The state of Delaware has bumped up their rebates by $1,000 over other states like Maryland. Plug-in hybrid vehicles can get $1,500 and battery electric vehicles can get up to $3,500.

Connecticut

This state take a more specific approach to making individuals qualify for rebates. Starting with plug-in hybrids that get more than 45 miles of range, there’s a $1,000 rebate ($500 if less than 45 miles). Electric vehicles with range over 200 miles can get $2,000, 120-199 miles get $1,500, and less than 120 miles get $500.

The biggest winners right now are by far, hydrogen-electric vehicles with a whopping $5,000 in rebates. On average, hydrogen vehicles cost considerably more. Like with most states, Connecticut has a $50,000 limit for PHEV’s and EV’s. Fuel-cell electric vehicles must be less than $60,000.

Colorado

An aggressive competitor in rebates back in 2019 with $5,000 for any EV and PHEV purchased. Today in 2021, the rebate dropped down to $2,500 for any new EV and $1,250 for any PHEV.

 

Can Electric Car Tax Credits Run Out?

Of course, they can. Here’s how it works. The government phases out the vehicle tax credits if the sales volume increase. This is based on a theory that the high cost of implementing new technology to a vehicle will decrease due to improved sales, which should eliminate the need for subsidies. 

With that being said, there is an expiration date for each manufacturer but it only comes after the manufacturer sells 200,000 vehicles. Before that, the expiration date doesn’t exist. 

Let’s take Tesla for example. In July 2018, Tesla hit their first milestone, meaning that Tesla vehicles bought anywhere from January 1 to June 30, 2019, are eligible for a total of $3750 of the federal credit. Today in 2021, no Tesla vehicle are eligible for rebates anymore (but it could be changing later this year).

Top Picks for EV and PHEV

Before you go, with all the information you saw about incentives, I want to show you the top 3 picks for best plug-in hybrids to buy. The picks are based on range and price (more range+lower price=winner). This applies for fully electric vehicle as well. Below I listed my picks:

Plug-in hybrids:

2021 Honda Clarity PHEV gets 48 miles per charge and qualifies for $7500 tax incentive. (cheapest found for $32,230 on cars.com).

2021 Toyota RAV4 Prime gets 42 miles per charge and qualifies for $7500 tax incentive. (cheapest found for $39,609 on cars.com).

2021 Ford Escape PHEV gets 37 miles per charge and qualifies for $7500 tax incentive. (cheapest found for $33,647 on cars.com).

Battery-electric vehicles:

2020 Hyundai Kona EV gets 258 miles of range and qualifies for $7500 tax incentive. (cheapest found for $32,515 on cars.com).

2020 Chevy Bolt EV gets 259 miles of range and qualifies for $7500 tax incentives. (cheapest found for $21,299 on cars.com).

2020 Kia Niro EV gets 238 miles of range and qualifies for $7500 tax incentives. (cheapest found for $32,506 on cars.com).

*BONUS: 2020 Nissan Leaf PLUS gets 226 miles of range and qualifies for $7500 tax incentives. (cheapest found for $27,600 on cars.com).