However, this is all changing. There is a new wave of investment that aims to get new demographics of drivers in EVs. From public charging incentives to new affordable electric models, there are ways to save when it comes to purchasing an electric car. And, the thing that wealthy EV drivers figured out long ago is that you will save money over the long run, too, with lower maintenance and fuel costs.
Now, if you’re in the market for a less expensive electric car, there is a new program for you.
How to Save on Your Next Electric Car
Starting this January, the federal government rolled out the first ever incentive program for pre-owned electric cars, offering up to $4,000 as a tax credit on your 2023 federal filing. The details are pretty straightforward, especially compared to the requirements for new electric cars.
Still, there are restrictions, so we’ll spell out what they mean:
- First off, you have to buy through a dealership. While this may seem like a downside, going through a reputable dealership can mean that your car is less likely to have a run-down battery or hidden structural issues. Asking for a Recurrent report on any used EV purchase will give you the knowledge you need to feel confident in the battery quality and expected range.
Going through a good dealer will also help you when you get down to requirement #5
- There are income maximums for you. If you file taxes by yourself, your adjusted gross income (AGI) needs to be less than $75,000 for this year or last. How to check? Dig up your latest tax returns and look at:
- line 39 on Form 1040
- line 21 on Form 1040A, or
- line 4 on Form 1040EZ.
If your income or deductions didn’t change a lot in 2022, then you can probably assume your AGI is about the same. Worst case, this is a good reason to get a jump on your 2022 taxes.
If you’re married and file with your partner, the maximum eligible AGI is $150,000, and it’s $112,500 for head of household filers. Again - while these income caps may seem like a bummer, they are there to make sure people who have traditionally been priced out of electric cars can get in.
- Have you used this tax credit in the past three years? NO! It’s not even possible, since this is a new program, so this requirement is easy for now.
- Is the car priced under $25,000? If not, can you sweet talk or trade your way into a price under $25,000? If so, you just may get that $4,000 off your year-end taxes!
- Finally, you need to make sure that the car hasn’t been sold to someone who meets the income requirements AND for a price under $25K since August 16, 2022. This has to be the “first transfer” of the car since that date. Early in 2023, you can likely assume you’re safe on this one, but it’s a bit TBD how shoppers can be expected to know this information in the future. Recurrent is working with our data to monitor “events,” such as new titles, that suggest a car sale, and your dealer may have some intel, too. We’ll keep everyone updated.
- Last thing to know! When you complete the purchase, the dealer should give you a letter or affidavit stating:
- The Dealership name and tax ID
- Your name
- VIN of the car you purchased
- Battery capacity of the car you purchased, and
- How much the credit is worth. This last part will be 30% of the purchase price OR $4,000 - whichever is less, sadly.
The dealership also needs to send this information to the IRS by next January 15 (2024). They still have to let everyone know what form to use, but Recurrent will update this page and others when we have it.
When it comes to actually getting the sweet payout, you’ll need to wait until you file your 2023 taxes and fill out form 8936. And here is where there is actually some nuance: if you don’t owe the government at least $4,000, you won’t get the full amount. This credit acts against anything you owe at the end of the year.
Say you owe $250. Then, you fill out the form above and owe nothing. Ditto if you owe $2500. If you owe $10,000 - it gets knocked down to $6,000. The point is: it may be worth adjusting your tax withholdings from your paycheck if you plan to use this credit so that you can take advantage of the full amount at tax time.
Sure, that takes a little planning, but so does owning an EV.
It’s good practice.
Learn about or read more from Liz Najman