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3 Hacks to Increase Your EV Tax Credits

The past few years have been painful for anyone trying to buy a car. We’ve seen nationwide car shortages during the global supply chain crisis, skyrocketing costs of car insurance, and higher APRs on auto loans due to the Fed raising interest rates.

Want to reduce your costs of car ownership? Buying an electric vehicle (and earning EV tax credits) could be good for your personal finances.

Let’s look at a few tips and insights on how to maximize your EV tax credits when buying a car in 2024.

1. Start with the IRS website — know the rules of EV tax credits

In truth, there are no clever “hacks” or shortcuts for how to get EV tax credits. The best way is to just follow the rules. Not every electric vehicle, and not every car buyer, can get EV tax credits. That’s because the IRS has set income limits on who can qualify.

If your income is too high, you can’t get the EV tax credit. Want to buy a new electric vehicle? Here is the modified adjusted gross income (AGI) you need to report on your taxes in order to qualify for a new EV tax credit:

  • Single filers: $150,000 or less
  • Married couples filing jointly: $300,000 or less

Want to buy a used EV? Feel free — there are EV tax credits (of up to $4,000) for used cars, too. But keep in mind that for the used EV tax credit, the used car’s sale price must be $25,000 or less. And to get the used EV tax credit, here’s what your modified AGI needs to be:

  • Single filers: $75,000 or less
  • Married filing jointly: $150,000 or less

Before you start shopping for an EV, read the IRS rules on Clean Vehicle Tax Credits (that’s what the IRS calls “EV tax credits”). This will help you avoid unpleasant surprises on next year’s taxes. (If your income ends up being too high, you might have to repay the IRS for your EV tax credit. But the IRS will let you qualify based on your modified AGI from the current year you bought your car, or the previous year, whichever is lower.)

If you feel confident that your income is at the right level to qualify for EV tax credits, go to FuelEconomy.gov. This site has great search tools and explanations of how the EV tax credits work, and which cars, SUVs, and trucks qualify for specific dollar amounts of tax credits in 2024.

How to search for EV tax credits for new vehicles

  1. Go to this website (it’s part of FuelEconomy.gov): Federal Tax Credits for Plug-in Electric and Fuel Cell Electric Vehicles Purchased in 2023 or After
  2. Under the headline “Search for Eligible Vehicles,” click the dropdown menu for “Delivery date.”
  3. Choose the dates for 2024.
  4. This will show you all vehicles that are eligible for new EV tax credits — including EVs and plug-in hybrid electric vehicles.
  5. Use the search tool to modify your choices. For example, you can search by certain car manufacturers (Tesla or Volkswagen) and models of vehicles.

This site is the best way to see quickly, at a glance, which electric vehicles can get the full $7,500 of new EV tax credits, and which ones can get a partial tax credit of $3,750. This will help you shop for your new EV with confidence. Before you go to the car dealership, shop around for quotes from the best car insurance companies, too.

How to search for EV tax credits for used (pre-owned) vehicles

  1. Go to this FuelEconomy.gov website: Federal Tax Credits for Pre-owned Plug-in Electric and Fuel Cell Vehicles
  2. Go to the section that says “Filter table by…”
  3. Search for the vehicle year(s), make, and/or model of your choice. (To be eligible for the used EV tax credit in 2024, used vehicles must be from model year 2022 or older.)
  4. If you set a wide range of model years, you can see a wide selection of used vehicles from all kinds of U.S. and international car makers — including Audi, Ford, Subaru, and Volvo.
  5. You can choose to search for all qualifying vehicles, or just EVs, plug-in hybrid electric vehicles (PHEVs), or fuel cell vehicles (FCVs).
  6. This page offers a used EV tax credit calculator, where you can see how much tax credit you’d get based on the sale price of your vehicle. The tax credit is 30% of the sale price, up to $4,000 — and only for used EVs priced at $25,000 or less.

3. One quick tip to protect your EV tax credit

Are you a high earner? Don’t lose your EV tax credit by having a too-high AGI. If your 2023 income was over the limit to qualify for EV tax credits, and you expect your 2024 income to be the same or higher, start planning now to increase your tax deductions for 2024.

Put more money into your 401(k), traditional IRA, or health savings account. Make extra contributions to charity if you itemize deductions. These moves won’t increase your EV tax credit, but they will keep you from having to pay that money back when you file taxes.

Bottom line

Uncle Sam is offering thousands of dollars of discounts on a new or used electric vehicle in 2024. Even if the cost of EV car insurance is more than a gas-powered car, these EV tax credits can make your overall cost of car ownership more affordable.

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This article was originally published by a www.fool.com . Read the Original article here. .

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