How Does the Federal Tax Credit for Electric Cars Work

If you’ve been exploring all-electric vehicles for your next Westport ride, you’ve probably heard about the electric car tax credit. It’s one of the biggest reasons you should buy an all-electric vehicle. So how does the federal tax credit for electric cars work?

The federal electric car tax credit starts at a minimum of $2,500 and goes up to $7,500 depending on your vehicle’s battery capacity and whether it meets certain critical mineral and battery component requirements. When Norwalk customers ask, “Why buy an all-electric vehicle?” we tell them about all the savings they’ll gain from the initial purchase onwards. Learn more from Mercedes-Benz of Fairfield about how to earn this credit on your next purchase. You can also reach out to our finance team for more information.

Which Models Are Applicable for the Federal Electric Car Tax Credit?

When buyers talk about why you should buy an all-electric vehicle, they might assume that this credit applies to every available model. But, that is false. Alongside being a new configuration, a qualifying all-electric vehicle needs to meet the following criteria:

• Draws propulsion using a traction battery with at least 7 kilowatt-hours (kWh) of capacity.
• Has a gross vehicle rating (GVWR) of up to 14,000 pounds.
• Is assembled and manufactured in North America.
• Meets critical battery and mineral component requirements (For EVs placed in service after April 18, 2023).
• Must be primarily driven in the United States.

If you’re considering buying an all-electric vehicle, remember that the model you’re interested in must be from a qualifying manufacturer to earn the maximum electric car tax credit of $7,500. Also, an all-electric vehicle lease might be a great option if you prefer not to own the car long-term, but remember that tax credits are only available for purchases.

All-Electric Vehicles That Qualify

Now that you know how the federal tax credit for electric cars works, remember that your vehicle must meet all the above criteria. Luckily, the latest Mercedes-Benz all-electric vehicles qualify for the federal electric car tax credit. So, when someone asks, “Why buy an all-electric vehicle?” the answer is you’ll qualify for some significant savings on your next model.

Am I Eligible for the Federal EV Tax Credit?

Now that you know your preferred Mercedes-Benz model qualified for this tax credit, you need to see if it can be applied to your taxes. While this EV tax credit is available for purchases, it’s important to know that an all-electric vehicle lease will direct the tax benefits to the lending institution.

Once you know you’re set on buying said model, consider how much you will owe in income tax for that year. This amount is key because it will cap how much of the tax credit you will receive. For instance, if you buy an all-electric model eligible for the full $7,500 and owe $3,000 in income tax, you can only earn $3,000 of the credit. If your model is only eligible for $1,500, you will only earn $1,500 instead. In other words, you can only earn the full amount if you owe at least $7,500 in income tax the year you purchased your all-electric vehicle and it does qualify for the maximum credit.

Remember, that you can’t pass this tax credit to someone else even if you decide to sell your vehicle. Only the registered owner of an eligible model can claim this credit, so if you want to buy a pre-owned all-electric model instead, you won’t be able to access this credit.

Learn More About the Electric Car Tax Credit at Mercedes-Benz of Fairfield!

Now that you know more about this credit and why you should buy an all-electric vehicle, experience one of these models around Weston. Explore our all-electric vehicle offers to see how much you can save. You can reduce what you owe by trading in your current model with us. Experience the thrill of all-electric driving around Westport with Mercedes-Benz of Fairfield.