According to The Edison Electric Institute, there are now more than one million electric vehicles (EVs) on U.S. roads. Another sign of the growing popularity of EVs? The IRS recently announced that General Motors, LLC (GM) has sold more than 200,000 vehicles which are eligible for the plug-in electric drive motor vehicle credit during the fourth quarter of 2018. As such, the tax credit allowed for purchasers of the new GM plug-in cars will be phased out. If you are looking to buy a new EV from GM (or another manufacturer) in the future, you should be aware of the tax incentives you may be entitled to because they could have a significant impact on your freelance taxes. Here’s the lowdown:
Plug-and-play EV tax credits are available
The plug-in electric drive motor vehicle credit is part of the Energy Improvement and Extension Act of 2008. It provides a credit for eligible passenger vehicles and light trucks. Under this law five quarters after reaching the sales threshold, the credit ends for the manufacturer. To use General Motors as an example:
Qualifying GM vehicles were eligible for a $7,500 credit if acquired before April 1, 2019. On April 1, 2019, the credit was reduced to $3,750 and on October 1, 2019, the credit will be further reduced to $1,875 for the next two quarters. After March 31, 2020, no credit will be available for these purchases.
However, this type of tax credit isn’t limited to GM vehicles. The IRS federal tax credit offers $2,500 to $7,500 per new EV purchased for use in the U.S. The amount of the tax credit depends on the size of the vehicle and its battery capacity. You can see a complete listing on FuelEconomy.gov’s Tax Credits for Electric Vehicles and Tax Credits for Plug-in Hybrids pages. These tax credits will be available until 200,000 qualified EVs have been sold in the United States by each manufacturer. Once the threshold is reached, as it has been in GM’s case, the credit begins to phase out for that manufacturer.
In addition to the federal tax credits and incentives for EVs, you may also be eligible for monetary and non-monetary incentives from your state, city, or even a local utility company. Depending on where you live you may be eligible for additional tax credits, vehicle or infrastructure rebates or vouchers, vehicle registration fee reductions, loans, and low-cost charging rates. On the flip-side, a few states also have fees specific to EVs, so be sure to check your state’s regulations and tax incentives related to EV purchases.
An EV purchase may drive down your tax bill
If you are thinking about joining this growing number of electric vehicle owners, be sure to consider how it may benefit your freelance taxes with any federal or state tax incentives you may be eligible for. This additional financial incentive will help to reduce the up-front costs of your plug-in electric vehicle purchase, a nice bonus to the inherent environmental benefits and gas savings driving an EV offers.