Is Your Car Eligible for a $7,500 Tax Credit?

As a free-lance musician, I can think of many times when I have spent three hours or more in the car, round-trip, for a two and a half hour rehearsal. In most cases, our pay for a gig is fixed, so the only way to take home more money is to reduce our expenses.

If you are in the market for a fuel-efficient vehicle, you may want to know about a tax credit available for the purchase an electric or plug-in hybrid vehicle. Worth up to $7,500, the credit is not a tax deduction from your income, but a dollar for dollar reduction in your federal income tax liability. In other words, if your tax bill was $19,000 and you have a $7,500 credit, you will pay only $11,500 and get the rest back.

This credit has been available since 2010, but in the last two years a significant number of new car models have become eligible for the tax credit. If you drive a lot of miles, these cars may be worth a look.

The credit includes 100% electric vehicles like the Tesla Model S or the Nissan Leaf, and it applies to the newer plug-in hybrid models, including the BMW i3, Chevrolet Volt, Ford C-Max Energi, Hyundai Sonata Plug-In Hybrid, and others. The credit does not apply to all hybrid vehicles, only those with plug-in technology. While the plug-in cars may be more expensive than regular hybrids, they are often less expensive once you factor in the tax credit.

The amount of the credit varies depending on the battery in the car, and may be less than $7,500. The credit is phased out for each manufacturer after they hit 200,000 eligible vehicles sold, with the credit falling to 50% and then to 25%. So, for those 400,000 people who put down a deposit on the Tesla Model 3, most will not be getting the full $7,500 tax credit. Only purchases of new vehicles – not used – are eligible for the credit.

The program is under Internal Revenue Code 30D; you can find full information on the IRS website here. An easier-to-read primer on the program is available at

Some states also offer tax credits or vouchers for the purchase of a plug-in hybrid or electric vehicle. Unfortunately, Texas is not one of those states! You can search for your state’s programs on the US Department of Energy website, the Alternative Fuels Data Center.

Do you have a plug-in hybrid or electric vehicle? Send me a note and tell me how you like it.






One response to “Is Your Car Eligible for a $7,500 Tax Credit?”

  1. Steven Ingham Avatar
    Steven Ingham

    Yes. I lease a 2018 Kia Soul EV plus. The lease is the way to go being the tax credit is passed on through the lease. The manufacturer may have some incentives also depending on the state you live in. Oregon also has a $2500 EV rebate. $5000 if you are under $50000 income. I’m a singer song writer with a small R%R band. My gigs are mostly 25 miles away. The Soul EV has lots of room for PA equipment, guitars, mike stands, etc. It is super cheap to drive an EV. Zero maintenance and rock solid dependable. So quiet for us sound sensitive types. This is my second leased Kia Soul EV. The first was a 2016 model. I sold it out of the lease to someone who loves it as much as I did. My first EV was a 2015 Nissan Leaf SL. A great car but I spent a lot of time charging it’s smaller battery. I have driven a total of 80000 miles all electric. I would never go back to a gas car, especially being the new models have over 240 miles of range per charge. That means round trips of 200 miles without charging, and just plugging in at home overnight if I like. But my Kia has more than enough range for my driving, and I drive a lot !! Your voice will improve with no fumes, singers !