Taxes are on every working American’s mind right now, so we wanted to take the time to explain the federal tax credit that is available on some plug-in hybrid electric vehicles (PHEVs) and all electric vehicles (EVs). Knowing about the credit could be beneficial to you and something you want to consider this year so you can benefit from it when you file this year’s taxes. But before you go run out and buy a car that qualifies for a tax credit so you can get some cash back on your taxes this year, wait and read.

• If you do buy a car that qualifies for a tax credit, the year you purchased it is the year you claim it on your tax returns. So, if you buy a car in 2017, you will file for the tax credit when you file this year’s taxes.
• A lot of people tend to think of a tax credit like a tax deduction, however that is wrong. A tax credit is only beneficial to taxpayers who owe money to the government for that tax year. For example, if you owe taxes for the tax year you bought your qualified vehicle, your vehicle’s credit will be applied to what you owe.
  • Example 1
    •  If you owe $5,000 and your vehicle qualifies for the full $7,500 tax credit, it will really only be worth $5,000 because you will not receive a check for the remaining $2,500.
  • Example 2
    • If you owe $10,000 and your vehicle qualifies for the full $7,500 tax credit, you will only owe the government the remaining $2,500 of the $10,000.
  • Example 3
    • If you receive a tax refund and your vehicle qualified for the full $7,500 tax credit, you will not benefit from the tax credit at all. Your tax refund will not be any more money than it would have been without the car purchase.

Qualifying Vehicles

The tax credit ranges from $2,500 to $7,500 per new PHEV or EV purchased for use in the U.S. The size of the tax credit depends on the size of the vehicle and its battery capacity. The more energy efficient a vehicle, the better the tax credit. The tax credit program for EVs and PHEVs will be available until 200,000 qualified EVs have been sold in the United States by each manufacturer. Once a manufacturer sells more than 200,0000 qualified vehicles, the credit will phase out for the manufacturer.

If you are interested in purchasing a vehicle that qualifies for a tax credit, you can buy one online with NowCar. NowCar sells five vehicles that qualify for the federal tax credit.

• Chrysler Pacifica Hybrid - $7,500 (PHEV)
• Chevrolet Volt - $7,500 (PHEV)
• Chevrolet Bolt - $7,500 (EV)
• Kia Optima Plug-in Hybrid - $4,919 (PHEV)
• Mitsubishi i-Miev - $7,500 (EV)

The full list of vehicles that qualify for a tax credit can be found here.