The federal rebate for electric vehicles – worth up to $7,500 – could be enough to convince many drivers to convert their next car into an EV. But the federal government isn't the only one handing out money to would-be electric vehicle owners. Many states have additional tax credits worth thousands of dollars that you can accumulate on top of the federal deduction.
Together, you could save more than $10,000 on an EV purchase, depending on where you live. However, it's not always easy to figure out what you qualify for. “These incentives are not just a Google search away,” he said Peter Glennfounder and co-CEO of EV Life, an EV financing platform.
We are protecting you. Here's what you need to know about electric vehicle tax credits at the state level.
How do EV tax credits work?
A tax credit is generally structured as a rebate. This means you pay the full price upfront and get the discount later when you file your taxes.
The federal government's EV tax credit is an exception, as car dealers can remove the discount from the list price, avoiding the hassle of claiming the discount later.
How it works at the state level depends on, well, the state. Before we get into that, let's take a closer look at the federal tax credit.
How does the federal EV tax credit work?
The federal government is offering car buyers up to $7,500 off the purchase of an EV.
New electric vehicles may qualify for the full credit of $7,500 or a partial credit of $3,750. There is also a similar tax credit of up to $4,000 for used electric vehicles.
The rules for which a car qualifies for credit are a little complicated. It depends on which specific model of car you are buying, where it is manufactured and how much it costs. You can see the full list of which vehicles qualify – and for how much – at this official government website.
And, as mentioned previously, this tax credit is unique in that participating dealers can apply the discount at the point of sale, eliminating the need for the buyer to submit paperwork to obtain the tax reduction later.
Which states have the best EV incentives?
In addition to this federal incentive, many states are now offering (or considering) additional rebates to make EVs more affordable.
Here is a list of the most generous EV rebates available at the state level right now.
“There’s a lot of money at stake in Colorado,” Glenn said. O state offers up to $7,500 when purchasing a new electric vehicle. To qualify for the full credit, the EV's list price must be less than $35,000; Cars between $35,000 and $80,000 may qualify for a smaller credit of $5,000. You can read more about the details and eligibility rules here.
The state of Maine is also giving up to $7,500 off the purchase of a new EV to residents who are under certain income requirements. Those who have higher incomes may qualify for a partial credit of $3,500. And the state also has an “any income” discount worth up to $2,000.
Although not as generous, Massachusetts also has a variety of discounts available. The best incentive is a $3,500 discount on the purchase of a new or used EV. There are smaller rebates of $1,500 and $1,000 available when you trade in a gas-powered car for an EV (through purchase or lease).
Maryland is currently offering drivers up to $3,000 off the purchase of EVs that cost less than $50,000. There are some restrictions and eligibility requirements, which you can see here. The state also offers 50% discount on cost installing a home charger, up to $700.
Delaware's electric vehicle rebate is worth up to $2,500. You can view the list of eligible vehicles on the state website. You can claim the rebate at the dealership – similar to the federal credit – or request it after the fact.
6. New York
In New York State, the Drive Clean discount can get residents up to $2,000 off the purchase or lease of a new EV. Here is the full list of cars who qualify for the New York discount. This credit can also be deducted from the list price of the car at participating dealerships.
While California pioneered statewide electric vehicle rebates, there is now less money available to residents than there used to be, according to Glenn. The California Clean Vehicle Rebate Project ends in November 2023. That said, some of the state's major metros have their own discountsas a $2,000 discount for income-eligible Peninsula Clean Energy customers.
Why are some states more supportive of electric vehicles than others?
Often, the states that are most generous to EV buyers are states that support clean energy more broadly. But Glenn said it also comes down to air quality: Many states justify their rebates for electric vehicles in terms of potential improvements in air quality by removing gas-powered vehicles from the roads.
In addition to the seven states listed above, there are many others with programs that are awaiting more funding or that are considering new EV rebates. “There are always new states coming on board,” Glenn said.
There are online tools where you can research your state's EV incentives. Glenn's company, EV Life, is just one of many options. Another is the U.S. Department of Energy State-Level Search Tool which allows customers to view current state incentives for EVs, HEVs (hybrid vehicles) and PHEVs (plug-in hybrid vehicles).
Some states to keep an eye on, according to Glenn, include New Jersey, Oregon, Texas, Illinois, Washington and Minnesota.
What local electric vehicle incentives are available?
Believe it or not, federal and state programs are not the end of free money available for EV purchases. Many local governments and utility companies offer even more incentives for electric vehicles.
O US Department of Energy also offers the ability to search by dealership to see which EVs, HEVs, and PHEVs qualify for local incentives.
You can also check with your city or electricity supplier to see if they may have additional rebates you can accrue on top of the federal and state tax credits.
“There’s a whole world of opportunities out there,” Glenn said.