Going Green: States with the Best Electric Vehicle Tax Incentives

The Zebra
March 2, 2019

electric vehicle hero

 

If you're in the market for a new electric vehicle or plug-in hybrid, you could be in luck. Many tax incentives are available to those who purchase or lease an electric vehicle or plug-in hybrid, both at the state and federal level.

We listed the states with the best tax incentives for electric vehicles and hybrids, but your state may still offer an incentive even if it’s not included below. Be sure to also claim your federal incentive if you qualify. These are also listed below.

 

What are tax benefits and incentives for electric vehicles?

Tax benefits and incentives are government-offered rebates to promote electric vehicle ownership and use. According to the U.S. Energy Information Administration, approximately 76 percent of all oil consumed in the U.S. is used in the transportation sector. Of that 76 percent of oil consumed, 92 percent of it comes from petroleum.

 

oil consumption

 

The heavy reliance on one fuel source, especially one that is non-renewable, can be a source of instability within our local and federal energy sectors. To help diversify types of energy consumed, state governments and the federal government have incorporated tax breaks and other incentives for owning or leasing electric vehicles.

The electricity used to power electric vehicles is mostly produced by domestic energy sources like coal, natural gas, nuclear and renewable resources like wind and solar. By using other energy sources besides petroleum, states are able to maintain a more diversified and stable energy infrastructure.

 

States with the best EV incentives

Each state has a slightly different set of rules and regulations for the tax rebates they provide. Read through below to see what type of EV-friendly tax incentives your state offers.

state electric vehicle tax incentives

 

1. Colorado

Rebate rates available by year (phaseout of tax program in place):

  • 2019: $5,000 for purchase, $2,500 for lease
  • 2020: $4,000 for purchase, $2,000 for lease
  • 2021: $2,500 for purchase, $1,250 for lease

Colorado offers the above tax rebates for purchasing or leasing an electric vehicle. Colorado has a phaseout plan implemented for this tax program, so if you live in Colorado and are considering purchasing an electric vehicle be sure to do it sooner rather than later. These years refer to the year you purchase an electric vehicle, not the year the vehicle was made.

2. Connecticut

Rebate rates available:

  • Plug-in hybrid: $1,000 rebate for 45 miles or greater range, $500 rebate for less than 45 miles range
  • Battery electric: $2,000 rebate for 200 miles or greater range, $1,500 rebate for 120-199 miles range, $500 rebate for less than 120 miles range
  • Fuel cell electric: $5,000

The Connecticut Hydrogen and Electric Automobile Purchase Rebate offers the above incentives for purchasing or leasing the specified vehicle types. To be eligible, the vehicle’s MSRP can’t exceed $50,000 for plug-in hybrid and battery electric vehicles and must not exceed $60,000 for fuel cell electric vehicles.

3. Delaware

Rebate rates available:

  • Battery electric vehicles: $3,500
  • Plug-in hybrid vehicles: $1,500

Delaware also offers rebates for retrofitted battery electric vehicles and plug-in hybrid electric vehicles. Read through Delaware’s clean fuel and transportation initiatives to learn more.

4. Maryland

Rebate rates available:

  • Battery electric or plug-in hybrid vehicles: $100 per kilowatt-hour (kWh), up to $3,000
  • Home charging equipment: 40% off, up to $700

Maryland offers the above incentives for all vehicles below $60,000 MSRP. Maryland is also one of the only states to offer a discount on home charging equipment, as well.

5. California

Rebate rates available:

  • Zero-emission EV: $2,500 for purchase or lease
  • Plug-in hybrid: $2,500 for purchase or lease

California’s Clean Vehicle Rebate Project offers the above tax rebate for zero-emission and plug-in hybrid vehicles. The program does have income eligibility restrictions that can disqualify you from the rebate. Those income caps are:

  • $150,000 for single filers
  • $204,000 for head–of–household filers
  • $300,000 for joint filers

6. Massachusetts

Rebate rates available:

  • Battery electric vehicles: $2,500
  • Plug-in hybrid vehicles: $1,500

Massachusetts MOR-EV program offers the above rebates on vehicles under $60,000 MSRP. Massachusetts also offers $700 off the purchase of an electric vehicle. If your vehicle is over $60,000 MSRP, you can still claim $1,000 through the MOR-EV program.

7. Oregon

Rebate rates available:

Battery electric vehicles with 10 kWh+ capacity: $2,500 purchase or lease
Plug-in hybrid vehicles with 10 kWh+ capacity: $2,500 purchase or lease
Battery electric vehicles with capacity of less than 10 kWh: $1,500 purchase or lease
Plug-in hybrid vehicles with capacity of less than 10 kWh: $1,500 purchase or lease

Technically, the Oregon Clean Vehicle Rebate Program is not a tax credit, but rather a cash rebate on any qualifying purchase or lease. Read through their FAQ to learn more.

8. New York

Rebate rates available:

  • Electric vehicles over $60,000: $500
  • Electric vehicles under $60,000: $2,000

New York’s above tax rebates are part of their Drive Clean Rebate program. The program has adjusted rates for the EPA ranges of the car. Those rates are:

  • Greater than 120 miles: $2,000
  • 40 to 119 miles: $1,700
  • 20 to 39 miles: $1,100

 

Federal government incentives

The federal government offers tax credits for electric vehicles through their Qualified Plug-in Electric Drive Motor Vehicle Tax Credit. Under this program, you can get a rebate of up to $7,500 for the purchase of an electric vehicle. Here are the guidelines:

  • Purchased after December 31, 2009
  • Has a battery of at least 4 kWh of capacity
  • Uses an external plug-in to charge

electric vehicle credit

 

These standards apply to both fully electric vehicles and plug-in hybrid vehicles. This tax credit will last until each major manufacturer has sold 200,000 qualifying electric vehicles, at which point the tax credit will begin to be phased out. To learn more, go to the Plug-In Electric Drive Vehicle Credit IRS website.

 

The future is electric

Electric vehicles are quickly becoming the norm on the road. In 2018, over 360,000 electric vehicles were sold – an 81 percent increase from 2017. With the meteoric rise of companies like Tesla and more and more consumers becoming eco-conscious, other major automakers are being forced to join the electric vehicle game. And they’re making some of the best cars that just happen to be electric.

 

electric vehicle purchase trends


So, if you are considering an electric vehicle but you are worried about upfront costs or vehicle reliability and standard, rest assured that there are many cost incentives and many well-made electric/hybrid cars to choose from. Once you’ve decided on the electric car that fits your needs, be sure to shop around for the best insurance rates for electric vehicles in your area.

Sources

20 Something Finance | CheatSheet