Are EV Tax Credits Retroactive?

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Managing Editor

As CarsDirect’s resident pricing expert, Alex offers must-know analyses of pricing & incentives to those looking to buy or lease a car. His consumer-oriented coverage of the latest trends and breaking news has been featured by The Wall Street Journal, Fox Business, Motor Trend, Automobile Magazine, and more.

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, Managing Editor - November 16, 2021

With the recent passage of a billion-dollar infrastructure bill and the prospect of an expansion of the EV tax credit, electric and plug-in hybrid car shoppers may be wondering if they should wait to buy. However, the answer as to whether or not the EV tax credit will be retroactive may not be as straightforward as you think.

Based on how the federal EV tax credit currently works, it is not a retroactive incentive and must be claimed on tax forms for the year in which you purchased your EV. Hypothetically, if you were to buy an EV in 2021 before a 2022 increase in credit amount, you would only be eligible for what was in effect in 2021. The limitations come down to when you bought your car and when the new law — if passed — goes into effect.

If you're leasing, whether or not the manufacturer's financing company is even passing along the EV tax credit as lease cash may vary from brand to brand. For example, Ford Credit doesn't even pass-on the credit to lessees of the Mustang Mach-E and doesn't appear to be planning to do so on the F-150 Lightning. That's not the case with every EV brand, which is why some cars can be exceptionally good deals when leased.

Despite the passage of the Biden administration's long-awaited infrastructure bill, a potential expansion of the EV tax credit remains on hold as part of the separate Build Back Better Act. The latest proposal involves up to a $12,500 EV tax credit, an increase from the current $7,500 EV credit but with a number of potential changes.

For example, the possibility of Tesla and GM once again becoming eligible for the tax credit could be big news for consumers. There has even reportedly been talk of changing the EV tax incentive into a refundable credit. Since the tax credit isn't the same thing as a rebate, this could boost savings for shoppers ineligible for the maximum amount.

Given supply constraints from most major automakers, and brands like Tesla quoting deliveries delayed as far out as 2023, buyers looking to time their purchase may have a difficult time. With much still in flux regarding the potential EV tax credit expansion, the actual guidelines could still be subject to change from lawmakers.

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, Managing Editor

As CarsDirect’s resident pricing expert, Alex offers must-know analyses of pricing & incentives to those looking to buy or lease a car. His consumer-oriented coverage of the latest trends and breaking news has been featured by The Wall Street Journal, Fox Business, Motor Trend, Automobile Magazine, and more.

Follow On: Twitter

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