If you’re trying to figure whether electric vehicles are worth their price, don’t forget to factor in the tax benefits.
The big one here is the federal tax credit of up to $7,500 that’s available on many battery-powered electrics.
That’s big money. Be aware, though, that the tax credit is not available on any General Motors products — or, for that matter, Teslas. The credit was structured so that only the first 200,000 qualifying vehicles sold by any manufacturer would qualify for the full amount — the goal being to give carmakers an incentive to get started.
Furthermore, that’s a federal tax credit, which means it’s something you have to claim when you file your taxes. It doesn’t come off the price at closing, like a manufacturer’s rebate or money for your trade-in.
And while tax credits are powerful stuff, lowering your liability dollar for dollar, the one for an EV isn’t refundable — in other words, it won’t give you back more than what you owe in taxes. So if you buy a 2020 Hyundai Kona crossover (MSRP $37,190, range 258 miles) and the $7,500 credit you’re eligible for exceeds your total federal tax liability, your tax bill goes to zero. That sounds pretty cool, sure, but it leaves some savings on the table.
Another twist: If you lease — which a number of experts recommend as a smart option for an EV, given how quickly the powertrain technology (read: range) is evolving — then the tax credit belongs to the manufacturer, not you. It will probably be factored into your lease payments, according to Green Car Reports, a website aimed at the EV marketplace. Depending on whether you could or could not claim the whole credit based on your own personal finances, this could be a benefit to you.
Also note that there are a variety of state and regional tax rebates and promotions available. Some are straight-out money in your pocket. Check out https://plugstar.com/tools/incentives to see, by ZIP code, what’s available to you. And some of the state and regional credits are also available on used purchases as well, which is not the case for the big federal tax credit.
David Muhlbaum is senior online editor at Kiplinger.com. For more on this and similar money topics, visit Kiplinger.com
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