If you own an electric vehicle or you’re buying one soon, you may qualify for programs that help you recoup the purchase price. The federal government provides an income tax credit of up to $7,500 for all-electric, plug-in hybrid, and fuel cell electric vehicles purchased before Jan. 1, 2023. If you missed that cutoff, you may qualify for a whole new slate of federal tax breaks in 2023 and beyond.
You may find programs for your state or city, as well. Many state and local governments, nonprofits, and utility companies offer tax credits and rebates to reward you for going green. Every program is different, so you’ll need to go through the details to see if you and your vehicle qualify. Here’s what to know before heading to the dealership.
Electric vehicle definitions
Some EV incentive programs restrict eligibility to certain types of cars, so it helps to understand some of the terms you may come across. Here’s a rundown of the major alternative-fuel vehicle types.
Alternative-fuel vehicles (AFVs) are cars that run on alternative fuel — such as electricity, biodiesel, or propane — rather than gasoline.
Battery-electric vehicles (BEVs) are powered with a battery and an electric motor.
Electric vehicles (EVs) use a battery and an electric motor, and they include battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs).
Plug-in hybrid electric vehicles (PHEVs) run on a combination of gasoline and electricity, so a battery and an electric motor in addition to a gasoline tank and an internal combustion engine power the car.
Fuel-cell electric vehicles (FCEVs) use pure hydrogen gas stored in a tank inside the vehicle. These cars produce zero tailpipe emissions.
Zero-emission vehicles (ZEVs) use alternative fuel sources, so they don’t produce greenhouse gas emissions and pollutants.
Keep in Mind
When you own an electric vehicle, you may also need electric vehicle supply equipment (EVSE), also known as charging stations, to recharge its batteries.
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Hybrid and electric vehicle incentives by state
The table below outlines the incentives you may receive when you purchase or lease an electric vehicle. Some are available at the state level, while others are through local nonprofits and utility companies. Many utility companies also offer rebates, bill credits, or other incentives for installing an EV charger. Customers can also typically receive “time of use” rates, which are discounted rates for charging during off-peak hours.
These perks may change over time, and this list is not exhaustive. If you don’t see a relevant incentive listed here, check with your state or local government or utility company for a list of savings options.
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States with the best EV incentives
While federal incentives for electric vehicles may be available for anyone in the country, the following states offer more reasons for drivers to switch to EVs.
No matter where you live in California, you’re bound to qualify for some type of incentive, rebate, or discount for purchasing, leasing, or owning an electric vehicle. On the state level, the Clean Vehicle Rebate Project provides rebates of up to $7,500 for BEVs and FCEVs and up to $6,500 for PHEVs. And through the California Air Resources Board, applicants can receive grants of up to $5,000 to partly cover the costs of buying an EV or PHEV. Eligibility for both programs is based on income.
Utility companies and nonprofits throughout the state have their own rebate programs, too. For example, the Bay Area Air Quality Management District offers a rebate of up to $9,500 for income-qualifying residents who retire an older car and replace it with a new, qualifying vehicle. Some insurance companies offer policy discounts for owning an EV in California, and some local governments provide free metered parking or free charging stations for electric vehicles.
Through the Vermont Drive Electric program, residents can receive up to $4,000 for purchasing a new eligible EV or up to $5,000 for buying a used high-efficiency vehicle. The amount depends on the type of EV (plug-in hybrid or all-electric), filing status, and income level. You can either claim the incentive directly at a participating auto dealer or by filling out an application.
In addition to the Drive Electric initiative, you may qualify for $3,000 through Vermont’s Replace Your Ride program and cash incentives through your local utility company. You can estimate your potential rebate by using an incentive calculator.
Connecticut residents may qualify for a cash incentive through the Connecticut Hydrogen and Electric Automobile Purchase Rebate Program (CHEAPR) when they buy or lease a battery electric vehicle, fuel-cell electric vehicle, or plug-in hybrid electric vehicle.
You’ll first need to choose an eligible vehicle from a licensed Connecticut automobile dealership or the original manufacturer, and the car’s base MSRP can’t exceed $50,000. The standard rebate is worth $750 to $7,500, based on the EV type you purchase, and income-qualified residents may receive a higher rebate of $2,250 to $9,500.
The Clean Vehicle Rebate Program provides rebates to Oregon residents who purchase or lease a battery-powered or plug-in hybrid electric vehicle. The incentive starts at $750 for zero-emission motorcycles and goes up to $2,500 for electric cars, though some income-eligible residents could qualify for a rebate of up to $7,500. To claim the rebate, you need to submit an application no longer than six months after buying the vehicle.
Through the Efficiency Maine program, state residents can receive a rebate of up to $7,500 for purchasing a battery electric vehicle or plug-in hybrid electric vehicle. You can either buy the car from a participating dealership, which will automatically reduce the price, or purchase directly from the manufacturer and later submit an application. The vehicle must be new, though income-eligible drivers may purchase a qualifying used electric vehicle.
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Electric vehicle incentives FAQs
Here are answers to some commonly asked questions about electric vehicle tax and rebate incentives.
Federal EV tax credits are available to people who buy a new plug-in electric vehicle or fuel cell vehicle from a qualified manufacturer. Starting in tax year 2023, the credit is worth up to $7,500 for new EVs and up to $4,000 — limited to 30% of the sale price — for used EVs. You need to meet income requirements to qualify. Married couples filing jointly may earn up to $300,000 per year, heads of households can earn up to $225,000 per year, and all other tax filers can earn up to $150,000 annually for eligibility.
California, Vermont, Connecticut, Oregon, and Maine all offer rebates of $7,500 or more when you buy or lease a qualifying electric vehicle and follow program requirements. Depending on the program, the car may be new or used.
Florida doesn’t have incentives for private residents buying an electric car, but several local utility companies offer bill credits or discounted rates to residential customers who charge their electric vehicles during off-peak hours and small rebates for buying electric vehicles.
To claim the federal tax credit, you need to include Form 8936 when you file your federal income tax return. This form also helps you determine your eligibility for federal tax credits.
As of the end of 2021, California was the state with the most electric vehicles in the U.S., with 39% of EVs nationwide. Florida has the second-highest count of EVs, followed by Texas.
- U.S. Department of Energy. "Federal Tax Credits for New All-Electric and Plug-in Hybrid Vehicles Purchased before 2023." Accessed March 1, 2023
- Internal Revenue Service. "Credits and Deductions Under the Inflation Reduction Act of 2022." Accessed March 1, 2023
- National Conference of State Legislatures. "State Policies Promoting Hybrid and Electric Vehicles." Accessed March 1, 2023
- Internal Revenue Service. "Credits for New Clean Vehicles Purchased in 2023 or After." Accessed March 1, 2023
- Alternative Fuels Data Center. "Florida Laws and Incentives." Accessed March 1, 2023
- Alternative Fuels Data Center. "Electric Vehicle Registrations by State." Accessed March 1, 2023