The Latest on Electric Vehicle Tax Credits in Texas

by | May 28, 2024

Electric vehicles (EVs) are gaining popularity in Texas, thanks in part to the various tax credits and incentives available to buyers. With the recent updates to the federal EV tax credit and the state’s own incentive programs, there’s never been a better time to consider going electric in the Lone Star State.

Federal Electric Vehicle Tax Credit

The Inflation Reduction Act of 2022 brought significant changes to the federal EV tax credit, now known as the Clean Vehicle Credit. The credit is worth up to $7,500 for the purchase of a new qualified electric vehicle and $4,000 for a used EV (up to 30% of the vehicle’s sale price).

To be eligible for the full credit, the vehicle must be assembled in North America and meet certain battery capacity and income requirements. The credit is available to individuals with an adjusted gross income of less than $150,000, head-of-household filers with less than $225,000, and couples with a household income below $300,000.

Tips for Maximizing the Federal EV Tax Credit

Research eligible vehicles: Make sure the EV you’re considering qualifies for the full credit by checking the U.S. Department of Energy’s list of eligible vehicles.

Time your purchase: The credit is applied to the tax year in which you purchase the vehicle, so plan your purchase accordingly to maximize your savings.

Consider leasing: If you don’t have enough tax liability to claim the full credit, leasing an EV may be a better option, as the leasing company can pass on the savings to you.

Texas Electric Vehicle Incentives

In addition to the federal tax credit, Texas offers several state-specific incentives for EV buyers:

Texas Emissions Reduction Plan (TERP): Offers grants to replace or retrofit vehicles to reduce emissions, applicable to certain hybrid and electric vehicles.

Light-Duty Motor Vehicle Purchase or Lease Incentive Program (LDPLIP): Provides financial incentives for the purchase or lease of eligible new vehicles, including electric and hybrid vehicles.

Electric Vehicle Charging Station Incentives: Various local utilities in Texas offer rebates and incentives for the installation of EV charging stations.

Tips for Navigating Texas EV Incentives

Check eligibility requirements: Each incentive program has specific eligibility criteria, so make sure your vehicle and purchase qualify before applying.

Apply early: Some incentive programs have limited funding, so apply as soon as possible to increase your chances of receiving the rebate or grant.

Combine incentives: In some cases, you may be able to combine federal and state incentives to maximize your savings, but be sure to check the specific requirements for each program.

Claiming the Tax Credits in Texas

To claim the federal EV tax credit in Texas, you’ll need to complete IRS Form 8936 and include it with your tax return. Be sure to keep all purchase-related documents, as they may be required for verification.

For state incentives, the process varies depending on the specific program. The Texas Commission on Environmental Quality (TCEQ) and the Texas Department of Motor Vehicles (TxDMV) can provide more information on eligibility requirements and application procedures.

The combination of federal and state tax credits and incentives makes now an ideal time to consider an electric vehicle in Texas. By taking advantage of these savings, you can reduce the total cost of ownership and contribute to a cleaner environment. Stay informed about the latest changes in EV tax credits by regularly checking the U.S. Department of Energy, Internal Revenue Service, and Texas state agencies.