Federal Incentive for EV Purchase or Lease

Federal, State, and Utility Incentives

Disclaimers:

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 May 12, 2022. We keep up as best we can.

Both the US Department of Energy, the State of Connecticut, and some utilities offer EV purchase incentives. Exclusions apply, so you’ll want to verify their availability before completing your purchase.

Federal Tax Credit Description

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 4kWh (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.

Phase-out for manufacturers exceeding the threshold

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.

The only other manufacturer that currently has EV sales in excess of 200,000 units is General Motors. Incentives for GM vehicles expired on March 31, 2020.

Toyota, Ford, and Nissan are likely to exceed the cap this year.

The Biden Administration’s Build Back Better (BBB) bill proposed substantial changes, including removal of the manufacturer cap. However, its prospects are looking bleak.

Fuel Cell Vehicles

The fuel cell vehicle tax credit that had been dropped in 2017 was reinstated at the end of 2019 and subsequently extended through January of 2022. The size of the credit is $8000. It is also referred to as a 30B credit. (There is a separate tax credit available, known as 30C, for fuel cell refueling stations, which are very expensive, require hydrogen storage, and not for residential use.) We are aware of 3 fuel cell vehicles currently available in the country. They are the Hyundai Nexo, Honda Clarity Fuel Cell, and Toyota Mirai. There are 3 FCEVs registered in the state, though none are being brought into CT at this time.

Other rules

This tax credit is associated with the car and not the person. In other words, it can be used for as many eligible EVs you buy as long as it is in effect.

This incentive does not apply to used vehicles.

Charging Station Incentives

UPDATE: This has been extended through 2021, per this page on the government’s Alternative Fuels Data Center website: https://afdc.energy.gov/laws/10513

There is a federal tax credit for residential charging station purchase and installation of 30% of the cost with a cap of $1,000. This credit is good for charging stations and installation purchased no later than December 31, 2021. At this time, this tax credit has not been extended to 2022.

Congress has been known to extend these retroactively. That isn’t the ideal way to motivate behavior, but that is why we leave it in the page for now. We suspect that it is caught in the morass of BBB.

 

January 2022 UPDATE: PURA Has Issued a New EV Rate Design for Charging Incentives

For Eversource customers, the company’s Connected Solutions brand will be home to the new program and the old program phased out.

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 has been published. However, it is a work in progress as more hardware is in the evaluation pipeline. This is the UI 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 (this is different than the initial information.

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 dumb 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.

An Advanced Managed Charging program will be offered beginning in 2023. Details have not yet been finalized.

These incentives are available to customers of Eversource and UI only.

Both Eversource and UI permit two incentives per household.

If you use a third-party for your power generation, that does not matter.

People are reporting difficulty in enrolling for the telematics incentive. Eversource and UI have been building out the website back-end and it should be complete by May 20.

Both PHEVs and BEVs are eligible.

Note: Eversource is keeping the Connected Solutions branding and migrating to the new incentives. Website content may not yet be updated.

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.
  • There is a plan to provide for demand charge mitigation. This is not yet finalized. However, in the near term, the utilities have a temporary rate plan. The charges get waived, but it is required that the chargers be separately metered. It is recommended to ask the utility how this applies to your particular circumstance.

Blog post about these incentives can be found here.

(The writing of the information about the incentives is a work in progress. There are also incentives for public destination chargers, workplace and light-duty fleets, municipalities, and DCFC (Level 3 fast chargers.)

 

IRS forms

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.

Update May 2022: Legislative bill SB-4 includes provisions that significantly effect CHEAPR. We do not yet have timing on when they will take effect. Perhaps there will be some information at the June CHEAPR board meeting. An implementation period is necessary.

  • MSRP cap increased to $50,000
  • 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.
  • We do not yet know if the LMI rebates will have pre-qualification which would enable a buyer to receive the rebate at the time of purchase. There is language in the legislation about vouchers. The current LMI rebates come as a reimbursement after the fact.
  • Expands eligibility from residential only to include businesses, municipalities, non-profits, and tribal entities.
  • 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. Our estimate is about $13 million per year.
  • Program sunset after 2025 is canceled.
  • $500 incentive for the purchase of an e-bike costing no more than $3000. This is expected to be targeted to LMI individuals.
  • CHEAPR board moves from a governance to an advisory role.
  • Incentive amounts are not addressed in the legislation and are up to DEEP.

Update June 2021: A new incentive regime was approved by the CHEAPR board during the February meeting. Implementation is effective June 7, 2021.

The June 7, 2021 start date was announced at the June 3rd meeting. We have heard there hasn’t been a lot of communication with the dealers or Tesla, and outreach to the public hasn’t yet begun, so it will likely take time to smooth all the kinks in the transition.

 Program  description:

New CHEAPR Incentives Spring 2021

The new program eliminates the distinction between long and short-range battery electric vehicles. It adds an incentive for used EVs and a supplemental incentive for limited-income individuals. 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. In other words, if you had already received a CHEAPR incentive, you can get two more. The new program is described in detail in this blog post.

The CHEAPR website has been updated. We find the site design to not be consumer-friendly and have expressed this to DEEP, who says they will look into the site design. If you look at the CHEAPR home page, the headline is rebates of up to $9500. This number only applies to a fuel-cell vehicle being bought by an income-limited individual. As a practical matter, a new BEV sold to an income-limited individual qualifies for $4250. That is really the ceiling.

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 $9500. 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. Enough about that.

Prior Program: This description of the “current” incentive is being kept since the higher incentives are viewed as temporary and they may revert to these older rates at some point. The higher incentives have been extended through December of 2022 or until funds depletion, whichever comes sooner. The income-limited supplemental and used rebates will remain in place.

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.

*Current incentives are as follows:

BEVs – $1,500 for driving range of 200 miles or greater

BEVs – $500 for driving range less than 200 miles

PHEVs – $500 any PHEV

FCEVs – $5,000 any FCEV

The MSRP cap applies to the base MSRP of the vehicle. It does not include options, destination fees, or taxes.

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 to verify currently available incentives and restrictions. They publish a list of eligible vehicles.

Share This