This is a nonrefundable tax credit. That is, your federal tax liability must be $7500. If you owe less than $7500 taxes that year, you can only claim upto the maximum that you owe.
For a single person, using standard deduction, with no other tax exemptions (college, etc) and credits, you have to have a minimum income of $56,000 to claim full tax credit. If you have other tax credits or deductions you can claim, you have to have more income accordingly.
Numbers below if you want to quickly estimate how much you can save if your income is less than $56,000:
- Standard deduction of $5950 and personal exemption of $3800.
- First $9,750 income, you pay $0 taxes.
- Next $8,925 income, you pay $892 taxes. Total income $18675
- Next $27325 income, 4098.75. Total income $46000, total tax - $4990.75
- Next $10037 income, $2509.25 taxes. Total income $56037, total tax $7500.
Watchout for:
- Minimum of $2500, maximum of $7500 based on battery capacity. For Nissan Leaf it is $7500. Mitsubishi MiEV $7500. Tesla $7500. Check for other vehicles.
- Credit phase out starts after manufacturer sells 200,000 vehicles. So, keep an eye on the vehicles being sold. This will probably take a few years.
- Make sure that the vehicle is being sold directly from the manufacturer to you, there are no middlemen. The credit can't be transferred, it is only available for the first owner, even if the first owner sells it without claiming. Make sure that the dealer didn't register the vehicle on the dealership name before selling it to you, you won't get rebate in that case. There was a problem with Chevy Volt buyers being screwed by dealers this way.
- Calculate cost of capital: Since you would claim this in next years tax returns, calculate cost of capital for $7500, lost interest or paid interest on loan for the X number of months between purchase and tax filing. Can reduce this if you buy in December. Lets say you take a loan at 2% APR, and bought it sometime now, six months from tax filing, the cost of capital is $75. PenFed is offering car loans at 1.74% APR for 72 months, rounding it to 2%.
- Sales tax could be the biggest loss. Since this is not a discount on price, but a credit to be filed with tax returns, it does not reduce the total price of the car. Consider the sales tax on $7500, which amounts to $525 at 7% sales tax. Need to confirm this with a dealer.
Cost of capital + sales tax: $600