What is the Federal EV Tax Credit and How Does it Affect You?
How does the EV federal tax credit affect the Outlander PHEV in 2022?
There are plenty of reasons to think about getting a new electric vehicle or hybrid this year. Gas prices are rising, climate change is an increasing worry, and electric cars are looking like the wave of the future. We may all be driving electric vehicles soon, but if you’re a fan of being the first to adopt cutting-edge technology, there’s a bonus for getting a hybrid right away. You might just save a big chunk of change on your taxes.
Tax time is always a little bit stressful, but you want to make the most of your savings. Understanding how the EV tax credit works can be a little confusing, but we’re here to simplify the process. Your new Outlander PHEV could actually save you thousands of dollars.
What is the Federal Tax Credit?
The Energy Improvement and Extension Act of 2008 is an incentive program designed to encourage drivers to switch from gasoline powered vehicles to electric and alternative fuel vehicles. Since electric vehicles tend to cost more upfront, the tax credit can help to offset the cost of the purchase. Electric vehicle adoption is a growing trend that can help to reduce greenhouse gasses and pollution, and early adopters of electric vehicles stand to get the biggest incentives for their environmentally-friendly choice.
The program applies to any all-electric and plug-in hybrid cars that are purchased new, in or after 2010. Those vehicles may be eligible for a federal income tax credit of up to $7,500. For qualified Plug-in Hybrid electric vehicles, the capacity of the battery used to power the vehicle determines the amount of the tax credit. It starts at $2,500, plus $417 for each kWh of battery capacity over 4 kWh.
How does the tax credit work?
You’ll need to make a claim on your taxes, which applies when you file for the year that you purchased and started driving your vehicle. Hold on to your receipts after the vehicle purchase, because you may need them to do the calculations, or in the event of an audit.
You’ll need IRS Form 8936, which is available on the IRS Forms and Publications website. Software like TurboTax should guide you through the forms, or you can talk to your tax advisor for help with the claim.
The EV tax credit isn’t considered refundable. It can only be applied towards taxes that you owe, so if the government owes you money instead, you won’t get paid the extra amount.
The credit does not apply to a vehicle that is purchased used, and it can’t be applied if you’re leasing the vehicle rather than owning it.
The full tax incentives only apply to the first 200,000 electric vehicles sold by a particular auto manufacturer. Once 200,000 units are sold, the tax credit starts to phase out. For the next 6 months, buyers will be eligible for 50% of the full credit amount, or $3,750. The following 6 months after that, the credit is halved again, for a $1,875 incentive. A year after the first 200,000 vehicles are sold, the credit is phased out completely. Some manufacturers like GM and Tesla have already phased out of the program, but for now, it’s still available for new Mitsubishi owners.
Tax Credit for the Mitsubishi Outlander PHEV
How much tax credit can you get for a Mitsubishi Outlander PHEV? For the 2021–22 model years, there’s an available tax credit of $6,587. There may also be state and local incentives available, depending on where you live, so be sure to find out if you can take advantage of other savings. Some locations also offer incentives if you install a dedicated charging station in your home or business.
Don’t forget that these tax credits won’t be available forever! You’ll get the most savings when you purchase a hybrid sooner rather than later. Come visit Lawrence Mitsubishi to check out our newest Outlander PHEVs and make the most of your tax savings.
Congratulations! You’re now saving a lot of money on your taxes and saving the planet at the same time.