Electric vehicles are usually more expensive than traditional internal combustion engine (ICE) vehicles. That’s where the federal tax incentive comes into play. Until December 31st, 2018, Tesla offered the full tax credit of $7,500 for all their vehicles. Now, it’s gone down to half at $3,750 and it’ll further decrease. For people like me, that was a difference in buying and not buying. In some states like California, you can get an additional $2,000 for buying an electric vehicle. But how does this work?
How Do You Get Your Money?
If you bought a Tesla before December 31st, count yourself lucky. You may be able to get $7,500 back if you have enough tax liability. What that means is if you earn 100k a year and you paid roughly 35k in taxes, you will get $7,500 back. If you only paid 5k in taxes, then you’ll only get 5k for your electric vehicle. Unfortunately, the credit doesn’t apply towards the next year if you didn’t get all your credit back.
When you file your annual taxes, you will need to file IRS Form 8936. You must have your car before filing this form. Reservations or deposits do not count. You can find out how much tax you paid on Form 1040, line 47, or Form 1040NR, line 45. This will tell you if you will get the full tax credit or not.
You should receive the money just like you would receive your tax refund. Good luck and happy tax season!
Can you get the tax credit if you buy used?
Unfortunately not. The tax credit is only available to the first buyer and cannot be transferable.
When will the tax credit end?
According to the Tesla website, the federal tax credit of $3750 will end June 30th, 2019. The tax credit of $1875 will end December 31st, 2019. This is subject to change.