June 17

Tax Incentives For Hybrid Vehicle Owners


As electric propulsion systems evolve, their popularity in cars, trucks, and SUVs grows. However, even with the technology advancing to the point where EVs often outperform their gas counterparts, some drivers remain wary of switching. That’s where the hybrid vehicle can help. 

Hybrid electric vehicles blend the power of a gasoline engine with the energy produced by an electric motor. This powertrain configuration delivers more torque and better mileage than a gas-only vehicle. However, most people don’t fully understand EVs and often have misconceptions about their performance and reliability. The gas engine helps relieve these concerns, making it the ideal first step toward zero-emission driving.

To further aid in the effort, the federal government offers incentives to manufacturers to produce more EVs and tax incentives to those who purchase them. Here, we explore the available incentives and discuss the additional benefits of EV ownership.

Federal Tax Credit

You may have seen advertisements touting the $7,500 federal tax credit if you purchase a hybrid or electric vehicle. However, conditions must be met to receive this credit, which isn’t always a $7,500 credit. How the incentive was legislated allows for a tax credit of “up to $7,500.” If you owe $4,000 in taxes and purchase a qualifying vehicle, you will receive a credit equal to the amount you owe up to $7,500. 

In this case, you would receive a $4,000 credit, bringing your tax debt to zero. You won’t receive an additional $3,500 in a refund, and you might see nothing in a credit if you received a refund anyway. Additionally, you can’t apply that $3,500 against the following year’s tax burden. Instead, it’s a one-and-done and only up to your tax debt.

Battery Capacity Rules

Buyers also must consider the type of EV they buy because the amount of your tax credit depends on the capacity of the battery used. One rule governing the tax credit states that the battery must be recharged using an external source. That rules out all HEVs because they don’t have plug-in charging capability. Instead, they recharge the battery by converting energy from the combustion cycle.

Another rule requires the battery to have a capacity of 5- kilowatts or greater. This rule has far less impact on qualifying because most PHEVs and EVs use 15 to 200 kWh batteries. The larger the battery capacity, the larger the tax credit. You would receive a $2,500 minimum credit for the smallest battery, and the credit caps off at $7,500.

Do Used EVs Qualify for the Tax Credit?

Used vehicles don’t qualify for the tax credit either. Only new cars from the 2010 model year and newer are eligible. In addition, the federal government only offers a tax credit for the first 200,000 vehicles sold by each manufacturer. At this stage, Tesla and General Motors have reached this plateau, so purchasing an EV from them won’t qualify you for the tax credit. The government plans to extend the tax break soon, but there’s no firm timetable.

Can You Qualify for the Tax Incentive on a Lease?

The federal government grants the tax incentive to the manufacturer when they lease an EV, not the person leasing the vehicle. Manufacturers often use this as an incentive and pass the savings to their customers. If a manufacturer offers this deal, you could pay little to nothing to start your lease.

Benefits of PHEV and EV Ownership

You won’t pay as much for gasoline with a PHEV and nothing for an EV. In addition, gasoline prices tend to fluctuate much more dramatically than electricity rates, so switching to an all-electric vehicle insulates you from rising prices. 

Charging your PHEV at home allows you to take advantage of off-peak electricity rates. Most home charging stations now feature a scheduling system where you program the time to start and stop. Newer charging stations allow you to operate these from your cellphone using an app for even more convenience.

Everyone is responsible for our planet. Keeping the land, air, and oceans clean protects future generations against climate change, erosion, and failing habitats. Knowing you have lowered your carbon footprint gives PHEV and EV owners the satisfaction they’ve done something good.

Hyundai PHEVs and EVs Qualifying for the Tax Credit

The following table describes the federal tax credit for Hyundai vehicles.

Hyundai Year, Make, and Model Vehicle Type Tax Credit Amount
2018-2022 Ioniq PHEV PHEV $4,543
2016-2019 Sonata PHEV PHEV $4,919
2022 Tucson PHEV PHEV $6,587
2022 Santa Fe PHEV PHEV $6,587
2017-2021 Ioniq Electric EV $7,500
2022 Ioniq 5 EV $7,500
2019-2022 Kona Electric Vehicle EV $7,500

We retrieved this list from fueleconomy.gov, last updated on April 21, 2022.

Additional requirements to qualify for the tax credit include:

  • A manufacturer must make the vehicle, not a conventional car, and convert it to an electric drive.
  • Title II of the Clean Air Act states that it must be treated like a vehicle.
  • It must have a gross vehicle weight rating of 14,000 pounds.
  • The vehicle must be acquired for use by the taxpayer, not for resale. 
  • The vehicle must be used primarily in the United States.
  • The vehicle must be in service during or after the 2010 calendar year.

Texas Incentives

Many states have developed their own programs. We encourage you to check with your state for more details. For instance, Texas offers discount electricity plans for PHEV and EV owners. 

The future of PHEVs and EVs continues to evolve, and they have already revolutionized the automobile industry. Huffines Hyundai McKinney plans to lead the way as more consumers switch to these alternative-energy vehicles. If you would like to learn more about Hyundai’s PHEV and EV options, please feel free to browse our inventory online

Then, when you’re ready for a personal demonstration of the power of electricity in a Hyundai, you can visit our dealership on North Central Expressway. One of our EV specialists will answer all your questions and let you drive the vehicle of your choice. We’re confident you’ll quickly see you won’t have to compromise quality or reliability with a PHEV or EV from Hyundai.


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