Federal, State, and Utility Incentives
We are not CPAs. It is always a good idea to check the foregoing with your accountant. This is for general informational purposes only.
Incentive levels and rules change all the time. This page was last updated on January 10, 2023. We keep up as best we can. If you see anything here that you think needs to be updated or corrected, please let us know, either via the website contact form or emailing us at email@example.com.
Both the US Department of Energy and the State of Connecticut offer EV purchase incentives. The two largest utilities in the state, Eversource and United Illuminating, offer incentives for the purchase and installation of a home charging unit, plus payments for off-peak charging. Norwich Public Utilities offers EV purchase incentives.
There are a lot of details to these, as you will see.
August 16th – Inflation Reduction Act signed by President Biden.
This bill extensively revises the federal EV tax incentives. The foregoing describes the incentive in as much detail as is available. There is still rule making that has to occur before the end of 2022 that could have an impact on vehicle eligibility.
Update – The IRS had initially planned to release its rule-making around implementation by the end of 2022. For the battery-related sourcing of critical minerals and manufacturing, they have given revised guidance that the rules will not be finalized until March at the earliest. That will generally work to the benefit of the consumer in that current rules, which don’t impose restrictions on where minerals are sourced, will not apply. It is will still create confusion as vehicles eligible in January may not be in April. But during this short window, incentive levels should rise.
- The new program begins in January 2023. The current incentive remains in place for the remainder of this year with the important modification that eligible vehicles must have final assembly in North America. That means that important manufacturers such as Hyundai, Kia, and Toyota are no longer eligible. The final assembly requirement continues with the new bill. Automakers are expected to rework their manufacturing and supply chains.
- The provisions of the IRA are in effect for 10 years.
New EV Incentive
- Tax credit of up to $7500 for new EVs.
- A minimum percentage of critical battery minerals must be sourced in countries with which the USA has a free trade agreement (50% of the incentive).
- A minimum percentage of battery assembly must be in North America (50% of incentive).
- Beginning in 2025, cars with any battery minerals sourced from an entity of concern (e.g. China, Russia) are excluded.
- North American final assembly required.
- Removal of manufacture unit cap for new cars. Currently when a manufacturer has sold 200,000 units, they phase out of the incentive. This change would enable Tesla and General Motors to again be eligible. Toyota, Ford, Nissan, and Hyundai have either crossed or are close to crossing the 200,000 threshold but that becomes moot with the IRA, assuming compliance with the other rules (Toyota and Hyundai are not currently building EVs in North America).
- MSRP cap of $80,000 for trucks, vans, and SUVs. (Please note: The IRS determines the category and their determinations don’t make a lot of sense to a rational person. This page on the IRS website lists which cap applies to which vehicles.)
- MSRP cap of $55,000 for sedans.
- MSRP is being defined as the manufacturer’s suggested retail price including trim, options, and accessories (but not dealer options, destination fees or taxes). This price may be different than what you pay as it does not take into account either discounting or surcharges.
- Software (e.g. Tesla FSD) is not included in MSRP cap.
- Income cap – Recipients of the tax credit cannot have a modified adjusted gross income over $300,000 for joint filers, $225,000 for a head of household filer, and $150,000 for an individual filer.
- Minimum battery pack requirement has been increased to 7 kWh, still very small. We can’t think of any PHEV with a battery pack size of <7 kWh.
- Unlike the current bill, the size of the battery pack does not figure into the incentive. A PHEV would, therefore, get the same incentive as a BEV.
- Both purchased and leased vehicles are eligible for the incentive. As is the case now, a lease is a way of getting the full incentive if one does not have the tax liability to absorb the tax credit. The incentive goes to the title-holder. It is up to the buyer to press the seller to ensure there is adequate transparency and that the incentive is incorporated into the calculation of lease payments. As of 2024, the transfer, described below, is a new option to get the full benefit of the rebate.
- Important recent development – leased vehicles may be classified as commercial transactions and not subject to all of these rules. The IRS has issued guidance to this effect, but final rule-making has not yet happened. Blog post here.
Used EV Incentive
- Used EV tax credit of the lesser of $4000 or 30% of the vehicle cost with max price of $25,000.
- Vehicle model year must be at least 2 years older than the current calendar year and must be first resale of the vehicle.
- An individual can take the used EV incentive no more than once every 3 years.
- Used vehicle incentive only available through dealers (new and used car dealers), not via private sale.
- Battery sourcing and assembly requirements do not apply for used vehicles.
- Income caps for used EV incentive – $150,000/$112,500/$75,000.
- Transfer/Rebate option – Beginning in 2024, the tax credit, at the buyer’s option, can be transferred to a participating dealer. The dealer has to be registered with the Secretary of the Treasury to be able to accept the transfer. The customer then receives the funds immediately as a rebate. This is true for used EVs, as well. The seller must report the vehicles VIN and the buyer’s tax ID. The buyer must report the VIN when filing federal taxes.
- Dealer must disclose amount of rebate to consumer and provide the full value of the rebate with a transfer. (This rule does not apply to a lease, hence the advisement above about obtaining transparency.)
- Income eligibility for new or used EVs is based on the current or prior tax year if you are taking the tax credit (whichever is lower). It is only the prior tax year if the transfer option is taken.
- Neither the income nor MSRP caps are indexed for inflation during the duration of the bill.
- Incentives are available for commercial vehicles without the above restrictions.
- Light duty vehicles are defined as 4-wheeled vehicles certified to travel on public roads and weighing less than 14,000 pounds.
- 2 and 3 wheeled EVs and E-bikes are not eligible.
First Quarter 2023 – Partial Implementation
The IRS has not finished rule-making regarding the battery incentives and announced a 3-month delay. That means that the old rules about battery pack size continue for now. Any BEV meets the battery pack size requirement for the full incentive. BEVs that are certified will receive the full $7500 credit. The IRS certification list will continually be revised as manufacturer documentation for vehicles is approved. Just because a vehicle appears on the list does not mean it is eligible for an incentive. It still must fall within the MSRP cap that is noted next to the vehicle. Many don’t. The battery pack size rule does affect many of the PHEVs. Those affected vehicles qualify for a smaller incentive. For those who want to take advantage of the higher tax credit prior to the battery rules implementation, Treasury advises that the purchaser must be in physical possession of the vehicle before the rules are in force.
The income restrictions are now in force.
The manufacturer cap is gone.
The MSRP caps are now in force.
The North American final assembly rule has been in force since August 16th.
Federal Tax Credit for the Remainder of 2022 (keeping this around through tax filing season)
The current program remains in place for the remainder of 2022, except, as noted above, with an added requirement that final assembly occur in North America.
The Federal government offers a maximum incentive of $7,500 in the form of a tax credit which reduces the total amount of income tax you owe. This is a dollar-for-dollar tax credit – not a tax deduction. For example, if you owe $15,000 in Federal income taxes, your tax liability would be reduced to $7,500 ($15,000 – $7,500). When we exhibit at EV showcases, we find there is still confusion on this point.
This assumes you owe at least $7,500 in federal income tax (over and above FICA). If your tax liability is less than $7,500 you receive a tax credit to a maximum of your tax liability. Therefore, if your Federal tax liability is $5,000 then your maximum incentive is $5,000. You will not receive a refund for the balance, nor is there a carry-forward.
You do not have to itemize your tax deductions to be able to use the tax credit.
There is a requirement that the EV has a battery pack that is a minimum of 5kWh (very small). The $7,500 is a maximum credit. Cars with smaller battery packs will receive a smaller credit. This links to the US Department of Energy website that has a list of which vehicles qualify for which level of credit.
For leased vehicles, the incentive goes to the title-holder. The dealer has some discretion here. It usually gets passed in whole or in part to the consumer. Ask the dealer to review the math of the lease.
There is a cap of 200,000 vehicles sold per manufacturer. At that point, a phaseout period begins.
After the 200,000 vehicle threshold is reached, the full benefit remains for the remainder of the quarter and the subsequent quarter relative to when the threshold was crossed. The maximum benefit is reduced by half ($3750) for the following six months and reduced by half again ($1875) for the six months following the initial reduction. Then it expires.
For example, Tesla, the first manufacturer to cross the threshold, did so in July 2018. The full credit remained through December 2018. The credit was halved ($3750) from January 2019 through June 2019. It was halved again ($1875) from July through December 2019. As of January 1, 2020, the tax credit for Tesla expired. If a vehicle is eligible for a lower amount than the max $7500, the same ratio of decline applies. Similarly, incentives for GM vehicles expired on March 31, 2020.
Just to be clear: If you bought an eligible (i.e. not Tesla or GM, for which eligibility had expired) EV that was not assembled in North America, but you bought it before August 16th or had a signed contract in place by that time if the car had not been delivered, you can claim the tax credit when you file your 2022 income taxes. From August 16th through the end of 2022, vehicles assembled in North America are eligible for the incentive.
This tax credit is associated with the car and not the person. In other words, it can be used for as many eligible new EVs you buy as long as it is in effect. For used EVs, the incentive may be taken no more than once every 3 years. This is different than how the state incentive works.
Federal Tax Credit for Residential Level 2 EV Chargers
This tax credit amounts to 30% of the cost for the hardware and installation, capped at $1000. It had previously expired at the end of 2021. The new credit applies retroactively to January 1, 2022. Beginning in 2023, new restrictions are applied to this credit in that the individual has to be residing in a distressed or rural community.
PURA Has Issued a New EV Rate Design for Charging Incentives for customers of Eversource and United Illuminating
For Eversource customers, the company’s Connected Solutions brand will be home to the new program and the old program phased out. The incentive is not offered for the other, smaller utilities operating in the state.
It went into effect as of January 1, 2022. There are subsidies for residential, commercial, municipal, and fleets. These include subsidized charging stations, make ready, discounts on electricity, and demand charge mitigation. These incentives are not retroactive to before 2022. The incentives for charging stations require the purchase of utility approved hardware. The list of approved chargers is subject to change as other makes go through the evaluation pipeline. From what we have been seeing, change happens slowly as there aren’t many approved options for residential. This is the Eversource page for residential equipment and here is commercial. The approved equipment lists are identical for both UI and Eversource. Approved chargers will be smart chargers and taking the subsidy requires enrollment in the managed charging program.
Both BEVs and PHEVs are eligible.
Residential Single Family Incentives
- Up to $500 incentive for purchase of a smart charging station.
- Up to $500 incentive for bring a 240 volt line to the garage, if needed.
- Owners give the utility permission to see charging data.
- Up to $200 per year for participating in demand-response charging events with a two year commitment.
It is possible to get incentives for a non-networked level 2 charging station that may have been previously installed or even for one that is bought new. In this case the charging information can be obtained either via vehicle telematics (if the vehicle has that capability), or the utility can send a device that will enable a dumb charger to access WiFi. There will be no charge for this device. The utilities will be publishing a list of which vehicles qualify for telematics.
A $100 enrollment incentive is offered to people who participate using either telematics or a charger upgrade device.
- An owner buying a new, ineligible charger is not eligible for the hardware subsidy, but is eligible for the installation subsidy.
The managed charging program in year one is limited to a demand response program. EV owners can get up to $200 per year ($50/month over 4 months) for their participation, whether that participation comes via a smart charger, telematics, or upgraded dumb charger. The demand response program is in effect from June 1 through September 30. During high demand periods, the utilities are permitted to reduce the rate of charge going to your vehicle. Your vehicle will charge at roughly the rate of a level 1 charger during these periods. Typically, an event will last up to 3 hours and occur between 3:00 – 9:00 PM. There can be up to 15 events per month. Customers will be notified in advance of these events and be permitted to opt-out. If a customer opts out of 2 or fewer events and is plugged in at least once per month, they still qualify for the $50 monthly incentive. A 2-year commitment is required. Event notifications are to be communicated via smartphone app, web portal, email, or text message, usually the day before the event, but sometimes the day of the event. If you are not home and therefore not plugged in during an event, and have not opted-out, that counts as participation.
If a home does not have enough space in its panel to accommodate an EV charger and wishes to upgrade electric service, that is not subsidized. Service upgrades can run $5000 or more. Before doing that, it may pay to find out how much room you have. If you can’t accommodate a 50 amp unit, maybe you can still do 30 amps and that isn’t a bad compromise. There are some new devices on the market that will share a 240 volt circuit with another appliance, such as a dryer. The IRA includes subsidies for smart panels, which can control your homes electricity usage (i.e. load management) to ensure the amount of service is not exceeded.
An Advanced Managed Charging program will be offered beginning in 2023. Details have not yet been finalized.
Both Eversource and UI permit two incentives per household.
If you use a third-party for your power generation, that does not matter.
People have reported that the enrollment process is cumbersome. That should be fixed at this point.
Both PHEVs and BEVs are eligible.
Apartments and Condos (a.k.a. MUD or multi-unit dwellings), and Commercial
Incentives are offered for multi-unit dwellings, defined as a minimum of 5 units. These are classified as commercial incentives. Multi-unit buildings of 2-4 units would fall under residential.
- Minimum of 2 ports required.
- Make ready incentives of up to 100% of the cost of bringing power to the location of the chargers. When planning the make ready, it is important to future-proof. You may eventually want more chargers than initially installed.
- Incentives of up to 50% of the cost of the charging station.
- Requires participation in a managed charging program, intended to encourage charging in low-demand periods of the day. This will not be in effect until 2023 as there is not yet an approved plan.
- A leasing option will be available for the chargers, which in this case would be owned by the utility. There will be a buyout option. The leasing plan is expected to be introduced in Q3 of 2022.
- There is a cap of $20,000 of incentives for an installation, which rises to $40,000 for buildings that are within a designated disadvantaged community. The utilities are providing maps to assist in locating whether a particular installation qualifies for the higher cap.
- Demand charge mitigation is available for level 3 chargers. The charges get waived, but it is required that the chargers be separately metered. We are not aware of a mitigation plan for level 2 chargers. It is recommended to ask the utility how this applies to your particular circumstance.
Blog post about these incentives can be found here.
(There are also incentives for public destination chargers, workplace and light-duty fleets, municipalities, and DCFC (Level 3 fast chargers.)
Norwich Public Utilities Incentives for Purchases of EVs and EV Chargers
These incentives, though offered by a utility, have nothing to do with the Eversource and UI incentives. The structure is straightforward and simple and applies to both vehicles and chargers.
- New BEV rebate – $1500
- New PHEV rebate – $1000
- Used BEV rebate – $1000
- Used PHEV rebate – $500
Used EVs must be no older than 2019 model year.
This program is a rebate that is given post purchase. Instructions on the site guide one to a user to a form and documentation submission. There don’t seem to be a lot of rules around what you buy, but we are less familiar with this program and advise checking.
The Norwich Public Utilities program also includes incentives for chargers.
- $1000 for a level 2 residential charger.
- $3000 for a commercial level 2 charger for workplace or multi-family dwelling.
- $4000 for a commercial level 2 charger that is open to the general public and is at a commercial or public location.
The charger part of the program does not have any of the managed charging rules and equipment limitations that are part of the Eversource/UI incentives. In other words, the program is entirely about promoting EV adoption and does not address grid management issues.
One should always check with an accountant to understand any potential tax liability associated with the rebates. This is the page for the program. The page only refers to 2022. We have been advised that the program has been extended to 6/30/23.
IRS forms (Rev 2022)
This is the IRS form 8936 for the EV purchase tax credit.
This is the IRS form 8911 for charging stations.
This is the IRS form 8910 for fuel cell vehicles.
State of Connecticut EV Purchase or Lease Incentives
CHEAPR Program Description
The Connecticut Department of Energy and Environmental Protection created a program referred to as the Connecticut Hydrogen and Electric Automobile Purchase Rebate Program (CHEAPR). The primary incentives are given as rebates. A rebate is more consumer-friendly in that it is immediate and will benefit those who do not have enough taxable income to qualify for the full federal credit. The income-limited incentives require filling out an application after purchase but that will be changing to a voucher system.
Update: Legislative bill SB-4 includes provisions that significantly expand CHEAPR. We have a rough idea of timing based on information provided in the most recent CHEAPR board meeting.
- Revised income-limited (LMI) rebate rules, extending eligibility for those with income levels up to 3 times the federal poverty rate – about $83,000 for a family of 4 or $41,000 for an individual. It is worth double-checking before applying.
- The LMI rebates will have pre-qualification or voucher which would enable a buyer to receive the rebate at the time of purchase. This is a big improvement over the current program. It is also the most complicated piece to build. DEEP is targeting a late first quarter of March 2023 launch.
- Expands eligibility from residential only to include businesses, municipalities, non-profits, and tribal entities. Expected timing – second quarter 2023.
- Program budget raised considerably. It now gets the entirety of the GHG part of the registration fee and a portion of the RGGI auction funds.
- Program sunset after 2025 is canceled.
- $500 incentive for the purchase of an e-bike costing no more than $3000. This is targeted to LMI individuals. Expected timing – sometime in the first half of 2023.
- CHEAPR board moves from a governance to an advisory role.
- Incentive amounts are not addressed in the legislation and are up to DEEP.
Current Incentive Levels
- Battery Electric Vehicle – $2250
- Plug-in Hybrid – $750
- Income-limited incentive for new BEV – $4250
- Income-limited incentive for new PHEV – $2250
- Income-limited used BEV incentive – $3000
- Income-limited used PHEV incentive – $1125
- MSRP Cap for new EVs – $50,000. The definition of MSRP is the trim level price. If you order options that raise the price above $50,000, that is ok. This is a little more forgiving than the definition for the federal incentive. Discounts or surcharges by the seller do not affect eligibility.
The frequency with which one can use this program has been changed to twice per driver per lifetime (up from once) and the count resets as of June 2021. In other words, if you had already received a CHEAPR incentive prior to that date, you can get two more.
(There is a fuel-cell vehicle incentive listed on the CHEAPR website. A fuel-cell vehicle qualifies for a $5000 base rebate, plus a $2500 incentive “adder,” then another $2000 for an income-limited individual. That is how they get to the max $9500 incentive. Just keep in mind that there are no fuel-cell vehicles currently for sale in the state and it is an “interesting” use-case where an income-limited individual would be buying the most expensive class of vehicle.)
CHEAPR is electronically integrated with dealers to facilitate applying the rebate directly to the purchase. CHEAPR also has a process to work with Tesla for qualifying vehicles. When you go out of state to pick up your vehicle, the people at the Tesla delivery center know the drill and will guide you through the process.
The incentive applies to new vehicle purchases and lease programs and is available on a “first-come, first-served” basis in case funding gets depleted.
The CHEAPR website can be used to verify currently available incentives and restrictions. They publish a list of eligible vehicles. If you are purchasing in the latter half of a calendar year, we recommend that you verify with the dealer that the database has been updated to include the new model year.