Uncle Sam wants to give you a big chunk of change as a reward for buying a new electric vehicle (EV). Pick up a new full electric or plug-in hybrid and you may be eligible for a federal income tax credit of up to $7,500. Tax credits are extremely attractive because they slash the total amount of income tax you owe. These are not mere deductions. A $7,500 credit will reduce your annual tax bill by $7,500. If you lease an electric vehicle, the tax credits usually go to the company holding the lease, not towards your tax bill.
Federal tax credit amounts are based on battery capacity. The larger the battery, the larger the potential credit. Some states (including California, South Carolina, Tennessee, New York, and Connecticut) provide additional tax incentives. Our list of tax credit-eligible EVs and plug-in hybrids focuses on vehicles with an MSRP of under $50,000 with current availability. New orders for the Tesla Model 3 will not be eligible for tax credits on delivery.