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Tax Credits for Electric and Hybrid Cars

Written By, Monique Y.

Ah, yes. Tomorrow is April 15th --Tax Day. It’s a dreaded day for those who owe taxes and a day loved by those who will receive a tax refund.

Taxes have been around long before our founding fathers founded the United States. If your history memory serves you, it’s why they separated from England. Anyone remember the Boston Tea Party?!

Enough about the history of taxes. Here is some useful information on taxes today. There are various state and federal tax breaks or incentives that have been added over the years. One of the most recent additions to the list of federal tax incentives, is a federal tax credit of up to $7,500 for taxpayers who purchase a qualified car that uses green energies.

So, if you are thinking about using your refund towards the purchase of a new car, or even purchasing a new car at some point this year, it may be worth your while to see if there is a qualified vehicle you like -- and you might be surprised by the variety of options. Currently, there are over 26 fully-electric and hybrid cars in the 2015 and 2016 model years that qualify for the credit. There is a big range in manufacturer, size and price. And, this list will continue to grow.

So, what vehicles qualify?

All fully-electric (EV) vehicles qualify for the entire $7,500 tax credit and there are a few hybrids (also referred to as PHEVs), that also qualify for the entire amount. Eligibility is largely based on how much electricity and gas the cars uses -- The more efficient a car is on electricity, the higher the credit. The credit available on almost all of the 2015 and 2016 model year hybrids are is typically between $3,600 and $6,000.

Here are some of the key requirements for a car to qualify for the federal tax credit for cars that use alternative energy:

  • It must be treated as a motor vehicle for purposes of title II of the Clean Air Act.
  • It can’t have a gross vehicle weight rating (GVWR) of 14,000 lbs. or more.
  • It must have a significant power source that is an electric motor which draws electricity from a battery which has a capacity of not less than 4 kilowatt hours and that can be recharged from an external source of electricity.
  • It must be a new vehicle.
  • The vehicle is acquired for use or lease by the taxpayer, and not for resale.
  • For the entire list of requirements and more information, visit

If you make a purchase eligible for the federal tax credit, the credit will be applied to the 2016 tax year (due April 15, 2017) . And, not only are purchasers eligible for the federal tax credit, but some states and local governments also offer additional tax credits.

Want to know more about the cars that qualify for a tax credit? Here are detailed summaries on all of the EVs and PHEVs that are available at NowCar and will get you the $7,500 federal tax credit: Kia Soul, Chevy Spark, Mitsubishi i-Miev, Chevy Volt. Stay tuned we will also be getting the 2017 Chrysler Pacifica, the first hybrid minivan, the 2017 Mitsubishi Outlander PHEV and the fully-electric 2017 Chevy Bolt this fall!