Federal tax credits for buying new electric vehicles sound really nice – but there are a finite amount of credits available.
The United States allows automakers to offer a $7,500 tax credit to buyers of battery electric and plug-in hybrid vehicles. Each manufacturer gets only 200,000 such credits to give out on such vehicles, and now Toyota has joined the likes of Tesla and GM in surpassing that threshold.
So, what does this mean for buyers of 2022 model year Toyota EVs and PHEVs? Well, anyone who was able to claim the tax credits still had to pay the full cost of the vehicle up-front anyway. A tax credit isn’t a discount on the car’s price, but rather it allows you to claim up to $7,500 in credit against the federal income taxes you owe in the year you bought the car – basically, it reduces your tax liability when you file.
If you’re eligible for a tax refund, you’ll get whatever that refunded amount is, plus that Federal tax credit. If your tax bill is lower than the credit, you’ll receive the balance as a refund.
As of new, buyers of EVs from Tesla, GM, and now Toyota simply won’t be able to apply for that maximum credit – but that doesn’t mean Toyota buyers are being totally hung out to dry. The credit will continue at full value until the second quarter after the 200,000 unit threshold is reached (so, next quarter), then continue at half value for six months, followed by another “halving” for an additional six months. Here’s what that looks like:
Toyota EV Tax Credit Wind-down
- July 1 to September 30, 2022 – Full $7,500 tax credit for qualifying Toyota EVs.
- October 1 to March 31, 2023 – Federal tax credit gets halved to $3,750.
- April 1 to September 30, 2023 – Credit halves again to $1,875.
- October 1, 2023 and onward – Tax credit drops to zero.
SOURCE | IMAGES: BLOOMBERG, TOYOTA.