Hey there, welcome to my blog where I share my thoughts on everything related to electric vehicles (EVs). Today, I want to talk about the tax credit for buying EVs in Canada and the US. What is the latest on this topic? Is it worth it to buy an EV with the tax credit? Is the price still higher even after the tax credit as compared to gas cars? And finally, what are some future trends and suggestions for EV buyers? Let's dive in!
First of all, what is the tax credit for buying EVs in Canada and the US? Well, both countries have different programs to encourage people to switch to zero-emission vehicles (ZEVs) and reduce their greenhouse gas emissions. In Canada, there is a federal incentive program called iZEV that offers up to $5,000 at the point of sale or lease for eligible light-duty ZEVs, such as cars, SUVs, and light pick-up trucks. There is also another program called iMHZEV that offers up to $200,000 at the point of sale or lease for eligible medium- and heavy-duty ZEVs, such as trucks, cargo vans, shuttles, and other commercial vehicles. On top of that, some provinces and territories offer additional incentives and rebates for buying new or used ZEVs, installing residential chargers, or shipping costs for the purchase of a used ZEV. You can check out the details of these programs on the Canada.ca website .
In the US, there is a federal tax credit program that allows you to claim up to $7,500 on your income tax return for buying or leasing a qualified plug-in electric vehicle (EV) in 2022 or before. The amount of the credit depends on the battery capacity of the vehicle and whether it has been phased out for a particular manufacturer. For example, Tesla and GM vehicles are no longer eligible for the full credit because they have sold more than 200,000 EVs in the US. You can check out the list of eligible vehicles and their credit amounts on the IRS website . However, there is a proposed plan by President Biden to increase the tax credit to $12,500 for EVs made and built on US soil as part of his Build Back Better Act. This plan has been passed by the House of Representatives but still needs approval from the Senate. It has also sparked a trade dispute with Canada, which has threatened to impose tariffs on US exports if the plan becomes law .
So, is it worth it to buy an EV with the tax credit? Well, that depends on several factors, such as your driving habits, your budget, your environmental impact, and your personal preference. Generally speaking, EVs have lower operating costs than gas cars because electricity is cheaper than gas and EVs require less maintenance. EVs also have lower emissions than gas cars because they use renewable energy sources or generate no tailpipe emissions at all. However, EVs also have higher upfront costs than gas cars because they have more expensive batteries and technology. The tax credit can help reduce this gap by lowering the initial purchase or lease price of an EV. But you also need to consider other factors, such as the availability of charging stations, the range of the battery, the resale value of the vehicle, and the impact of weather conditions on performance.
To give you an idea of how much you can save by buying an EV with the tax credit in Canada and the US, let's look at some examples. According to MSN , some of the EVs that qualify for the full $7,500 tax credit in 2024 are:
- 2022-2024 Ford F-150 Lightning (Extended Range Battery) with an MSRP limit of $80,000
- 2023-2024 Hyundai Ioniq 5 with an MSRP limit of $45,000
- 2023-2024 Kia EV6 with an MSRP limit of $45,000
- 2023-2024 Nissan Ariya with an MSRP limit of $40,000
- 2023-2024 Volkswagen ID.4 with an MSRP limit of $40,000
Let's say you want to buy a 2023 Nissan Ariya with an MSRP of $40,000 in 2024. If you live in Canada, you can get up to $5,000 from the iZEV program plus any provincial or territorial incentives that may apply. For example, if you live in Quebec, you can get another $8,000 from their provincial program. That means you can save up to $13,000 on your purchase price and pay only $27,000 for your new EV. If you live in the US,
you can get up to $7,500 from the federal tax credit program plus any state or local incentives that may apply. For example, if you live in California, you can get another $2,000 from their state program. That means you can save up to $9,500 on your purchase price and pay only $30,500 for your new EV.
Of course, these are just hypothetical scenarios and the actual savings may vary depending on the specific vehicle, the location, the tax rate, and other factors. But you can see that the tax credit can make a significant difference in the affordability of an EV compared to a gas car. According to Edmunds, the average MSRP of a new car in 2024 is expected to be around $42,000. That means an EV with the tax credit can be cheaper than an average gas car without the tax credit.
But is the price still higher even after the tax credit as compared to gas cars? Well, that depends on how you compare them. If you compare an EV with a gas car of the same size, class, and features, then yes, an EV may still be more expensive even after the tax credit. For example, according to Car and Driver, a 2024 Honda Civic has an MSRP of $23,000 while a 2024 Hyundai Ioniq 5 has an MSRP of $45,000. Even with the full $7,500 tax credit in the US, the Hyundai Ioniq 5 is still $14,500 more expensive than the Honda Civic. However, if you compare an EV with a gas car of a different size, class, or features, then no, an EV may not be more expensive even after the tax credit. For example, according to Car and Driver, a 2024 Ford F-150 has an MSRP of $32,000 while a 2024 Ford F-150 Lightning has an MSRP of $80,000. But with the full $7,500 tax credit in the US, the Ford F-150 Lightning is only $40,500 more expensive than the Ford F-150. And if you factor in the lower operating costs and emissions of the EV, then the difference may not be that significant over time.
So what are some future trends and suggestions for EV buyers? Well, one trend is that EVs are becoming more popular and diverse as more manufacturers enter the market and offer different models and options. According to TechCrunch , only five EVs qualify for the full federal tax credit in 2024 under the current rules: Tesla Model 3 and Model Y; Ford Mustang Mach-E and F-150 Lightning; and Chevrolet Bolt EUV. But under Biden's proposed plan, more EVs would qualify for the higher tax credit of $12,500 if they are made and built in the US by union workers. This would include vehicles from GM, Ford, Stellantis (formerly Fiat Chrysler), Honda, Toyota, Hyundai-Kia,
BMW, Mercedes-Benz, Volkswagen Group and Volvo Group. This would also create more competition and innovation in the EV market and benefit consumers with more choices and lower prices.
Another trend is that EVs are becoming more advanced and efficient as technology improves and battery costs decline. According to BloombergNEF , battery prices have fallen by 89% in the past decade and are expected to fall below $100 per kilowatt-hour by 2023. This would make EVs cheaper to produce and operate than gas cars on a global average. Moreover,
EVs are becoming smarter and safer as they incorporate features such as autonomous driving,
wireless charging,
bi-directional power flow,
and vehicle-to-grid integration.
These features would enhance the convenience,
performance,
and sustainability of EVs and make them more attractive to consumers.
So what are some suggestions for EV buyers? Well,
here are some tips that I have learned from my own experience:
- Do your research before you buy or lease an EV. Compare different models and options based on your needs,
preferences,
and budget.
Check out online reviews,
ratings,
and forums for feedback from other owners.
Visit dealerships or showrooms to test drive or inspect the vehicles in person.
Look for incentives or rebates from federal,provincial,state,
or local governments or utilities that can lower your purchase or lease price.
- Plan ahead for your charging needs. Find out where you can charge your EV at home,at work,or on the road.
Consider installing a Level 2 charger at your home if you have access to a garage or a parking spot with an electrical outlet.
This will allow you to charge your EV faster and cheaper than using a Level 1 charger that plugs into a regular wall socket.
Alternatively,you can use public charging stations that offer Level 2 or Level 3 (also known as DC fast) charging.
These are usually located at shopping malls,restaurants,hotels,or highway rest areas.
