Federal Incentive for EV Purchase or Lease
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 April 16th, 2021. 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.
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.
These credits expire on an individual manufacturer basis based on reaching a threshold of 200,000 vehicles sold.
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 crossed the threshold 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.
We expect this incentive will be expanded by the Biden administration.
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.
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: Good News! 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 through 2021.
Eversource Incentive for Connected Charging Stations
Eversource is offering a financial incentive of $300 for signing up for its “ConnectedSolutions” program for residential charging stations. You can get $300 over the course of 3 years for enrolling an existing charging station or $300 for making a 3-year commitment upon installing a new charging station. In order to qualify, the charging station must be WiFi-enabled. Eversource may decrease the rate of charge during periods of heavy electric use. The point of this is to enhance utility load-management. Please see its page for details.
Our take: We would prefer to see the utilities and the Public Utility Regulatory Agency (PURA) come up with a more compelling and permanent time of use regimen, whether active or passive. This incentive barely covers the cost difference between a smart charger and a dumb charger.
Clearview Energy has partnered with ChargePoint to offer a rate that provides for free EV charging on the weekends (and electricity sourced from renewables) for customers with a networked ChargePoint charging station. This comes with a slightly higher overall rate, so you would need to run the numbers to determine if this will save you money. Please read the fine print here.
There is talk from the incoming Biden Administration that it seeks to be much more proactive about encouraging EV adoption. If any of that translates into incentives, and we hope the federal incentive gets updated, we will write about it here.
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
Update: A new incentive regime has been voted on by the CHEAPR board.
It is expected to become effective on or about April 1, but as of April 16th, the CHEAPR website has not been updated to reflect what the board approved. We think we are at least 6-8 weeks from the updates going into effect and, of course, we will provide updates when we get them. Here is the program description:
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 remains once per driver per lifetime. The new program is described in detail in this blog post.
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 program offers a maximum incentive of $1500* for eligible battery electric vehicles (BEVs), $500 for plug-in hybrid vehicles (PHEVs), and $5000 for fuel-cell electric vehicles (FCEV). There are not currently any FCEVs being sold in the state. The incentive can be credited to the purchase or sale agreement or be sent in the form of a check. In other words, this is a rebate, not a tax credit. 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 program advertises that rebates can be as high as $5,000. This is technically true, but misleading. As noted above, that amount is only available for fuel-cell vehicles. CHEAPR has not handed out a single rebate for this type of vehicle and there are none currently being sold in the state. They obviously feel it is important to support this technology but as a practical matter, the BEV and PHEV rebates described below are what count, and those incentives are lower.
CHEAPR is electronically integrated with many dealers to facilitate applying the rebate directly to the purchase. CHEAPR also has a process to work with Tesla for qualifying vehicles (not many at this point). 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
Each individual with a valid CT driver’s license is entitled to one rebate (lifetime). (Pro tip: Avoid co-signing for a vehicle. If you co-sign, you will both get dinged for having used the incentive.)
It’s important to note that as of October 15, 2019, the incentive only applies to BEV and PHEV vehicles with an MSRP of $42,000 or less and $60,000 or less for FCEVs.
You can learn more about how this change affects your possible rebate and the negative effect it has on EV adoption in Connecticut from this EV Club of Connecticut blog post.
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. CHEAPR is currently funded at $3 million per year through 2025. Unused funds from 2020 will be rolled over into 2021 and the budget is approximately $5.2 million for this year.
*You’ll want to check the CHEAPR website to verify currently available incentives and restrictions. They publish a list of eligible vehicles.
The CHEAPR board has voted on changing the parameters of the program and these changes will take effect on or about April 1st. Highlights:
- Incentive for battery electric vehicles raised to $2250 for 2021. This applies to BEVs of any range (which represents a change).
- Incentives for plug-in hybrids raised to $750.
- There are two new income-limited incentives:
- $3000 for used BEVs
- $1125 for used PHEVs
- A supplemental (additional) incentive of $2000 for BEVs
- A supplemental incentive of $1500 for PHEVs
- The MSRP cap of $42,000 for new EVs is unchanged.
A more detailed review and our opinion of the changes can be found in this blog post.
Reduced Registration Fee for BEVs
The State of Connecticut also offers a reduced registration fee for BEVs. The biennial fee is $38.00, which is a savings of $42 off of a standard registration. You can read more at the DMV website. We assume this applies to FCEVs, but the language on the DMV website is general and this is not verified. Of course, the FCEV question is also moot since these are not for sale currently in the state. Also, BEVs do not have to go for emissions inspections.