How To Get the Most out of Your EV Tax Credit
US citizens who buy a new electric vehicle, are eligible for a federal tax credit of up to $7,500. Notice the “up to” part, if you pay less than $7,500 in taxes, you aren’t eligible for the full $7,500 credit. But there are ways to try and get the most from this tax credit.
Now, full disclosure, this isn’t possible for all the electric vehicle brands. But some dealers will give you the full $7,500 off the regular price if you lease the EV. Unfortunately, Chevrolet and Tesla aren’t known for doing this.
There’s no harm in checking with the dealer, however, as policies do change.
Create a Tax Liability
Again, full disclosure, I’m not an accountant and this isn’t financial advice, just an avenue some people have taken. If someone pays less than $7,500 in taxes, they may be able to create a tax liability which would bring them up to the mark.
A possible way of doing this is converting untaxed 401K money into Roth IRA, which is taxed. You would need to convert enough money to push your taxes up to the $7,500 mark for the year.
After buying a new electric vehicle you will then get the $7,500 tax credit. This means you won’t have to pay any tax on the Roth IRA money when you take it out. Again, this is just an idea some people have used.
For some people, waiting to buy might be the best option. It might sound like a cop-out but it’s not. Recent studies have shown that people change jobs more than ever; the average person changes jobs between 10-15 times throughout their lives.
Changing jobs is usually done to progress your career and, as such, usually results in a noticeable salary bump. Even if you’re not planning on changing jobs, the average US citizen’s salary increases by around 3% each year. Not a huge number, but you’ll still be paying more in tax.
Either way, there’s a fair chance you’ll be paying more in tax by next year. So, if you can hold off on purchasing an EV until next year, you could be closer to the $7,500 mark. Whether or not waiting is worth it, is up to you.
Don’t Take Too Long
If there’s a particular brand of EV you have in mind, keep an eye on their sales figures. As soon as a manufacturer sells 200,000 electric vehicles in the US, the federal tax credit ceases to be available for their EVs.
If you have any hacks for making the most of the EV tax credit, let us know in the comments section below.