One of the advantages that come with an electric vehicle or a plug-in hybrid is the option to get a tax credit. You’re also reducing the amount of fuel that you use, thereby reducing the greenhouse gas emissions that get produced.

Although an electric vehicle’s cost can be significantly higher, several tax breaks are often available at the local, state, and national levels. The biggest one of them all is about $7,500, but not every buyer qualifies for them.

In some situations, electric vehicle purchases might not qualify for a tax credit at all.

How to Determine the EV Tax Credit

The federal electric vehicle tax credit offers up to $7,500 back based on your circumstances and the vehicle selected.

You qualify based on the vehicle’s battery pack capacity instead of the performance, price, or range it achieves. You can only claim the credit up to the amount of your tax liability in the year of the purchase.

If you want to know what is available for each vehicle today, you’ll want to visit fueleconomy.gov before signing any papers.

The EV must be a road-going vehicle that gets charged from an external source. If it doesn’t contain a battery pack with a 4-kWh capacity or higher, you won’t get to claim anything. That means a vehicle with an internal charging and no plug won’t qualify.

That means some vehicles, including the 2020 Toyota Prius, but the Toyota Prius Prime might generate some cash.

Sales Volumes Caps Also Apply to the Tax Credit

If you purchase a vehicle from General Motors or Tesla today, you won’t qualify for the EV tax credit.

The federal government has sales volume caps placed on all manufacturers. These two companies have already exceeded those figures.

You must purchase the vehicle as a new car for it to qualify. If you plan to export the vehicle, the tax credit might get revoked when filing taxes.