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EVs and Plug-In Hybrids: 7 States With Compelling Tax Incentives

Earth Day is here, and we’ve decided to celebrate in our own special automotive way: by listing seven states that have especially strong tax incentives for electric vehicles (EVs) and plug-in hybrids. If you live in one of these states, you may want to seriously consider owning an EV or a plug-in hybrid. The tax savings you can reap might make it far more cost-effective to own an EV or a plug-in hybrid than a traditional gas-powered car, no matter how fuel efficient it is.


Although there have been many discussions about California decreasing its EV tax credit, the Golden State has offered up to $2,500 in state income tax rebates on electric vehicles for several years, and it doesn’t show any signs of letting up in the immediate future. Unlike some states, however, California doesn’t apply its $2,500 tax credit to all plug-in vehicles. On the contrary, plug-in hybrid models receive only $1,500 in rebates, while only fully electric cars receive the entire $2,500. For now, both fully electric and plug-in hybrid cars also get unfettered access to California’s many HOV lanes.


Colorado is currently the nationwide leader in EV tax credits, offering up to $6,000 in income tax credits for drivers who register new EVs in the state. And there’s more: The program offers up to $6,000 in tax credits for used electric vehicles if they haven’t previously been registered in Colorado, making Colorado one of the only states offering credits for used electric vehicles. Best of all, Colorado’s program doesn’t only apply to fully electric vehicles; it also applies to plug-in hybrids such as the Chevrolet Volt and Ford Fusion Energi.


Georgia has one of the most generous electric vehicle tax credits: an income tax credit of up to $5,000 for drivers who purchase any fully electric car. Unfortunately, that credit ends on July 1, 2015, which means you’ll want to purchase your electric vehicle soon if you plan to take advantage. However, even after the tax credit program ends, Georgia will still allow electric vehicles to use HOV lanes, which can be a huge benefit for drivers in the traffic-snarled Atlanta area.


Louisiana’s electric vehicle tax credit is tremendously generous, though it benefits shoppers who choose vehicles with larger batteries over ones who buy vehicles with smaller batteries. For proof, consider the Tesla Model S 85, whose 85-kWh battery qualifies the vehicle owner for an impressive $13,600 in state income tax rebates. Opt for the Model S 60, and you’ll get up to $9,600 in tax rebates. Meanwhile, the Nissan LEAF, which uses a 24-kWh battery, qualifies for just $3,840 in tax rebates. That’s still not a bad figure. Louisiana’s tax rebates also apply to plug-in hybrid vehicles, though they’ll qualify for smaller figures because of their smaller batteries.


The state of Massachusetts offers up to $2,500 in state income tax rebates for electric vehicles and plug-in hybrids through its MOR-EV program, an acronym for Massachusetts Offers Rebates for Electric Vehicles. The program has no end date in sight, and it applies not only to the usual fully electric vehicles and hybrids but to zero-emission motorcycles and fuel-cell vehicles, too. The $2,500 rebate applies to each vehicle, regardless of cost, meaning that drivers who buy a more or less expensive electric vehicle will still qualify for the same tax credit.

New Jersey

Although New Jersey’s alternative-fuel vehicle tax incentive applies only to fully electric vehicles, it’s an impressive one: All electric vehicles are exempt from New Jersey’s sales tax. That’s a huge number for some EV buyers, since New Jersey state sales taxes can run as high as 7 percent. Drivers who purchase a high-end Tesla Model S sedan, for example, can keep almost $10,000 in sales tax savings. But the tax incentive isn’t a small figure for far less expensive cars either, such as the Nissan LEAF, whose drivers could easily take in nearly $2,500 in sales tax savings on a well-equipped model.


Washington’s alternative-fuel vehicle tax credit expires on July 1, 2015, which means you’ll want to buy your EV before that date to take advantage of the savings. Just what are those savings? The state offers an impressive exemption from its sales tax for all electric vehicles, a program that can deliver savings of up to $10,000 for Tesla owners in some of the localities with the highest sales tax rates. Even if you don’t buy a $100,000-plus Tesla, though, you can still save some big money. Choose a $35,000 Nissan LEAF, and you might be able to keep more than $3,000 that you would’ve otherwise spent in sales taxes for a traditional gas-powered vehicle.


Doug Demuro
Doug DeMuro writes articles and makes videos, mainly about cars. Doug was born in Denver, Colorado, and received an economics degree from Emory University in Atlanta. After graduation, Doug spent three years working for Porsche Cars North America. Eventually, he quit his job to become a writer, largely because it meant that he no longer had to wear pants. Doug’s work has been featured in a... Read More about Doug Demuro

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  1. Due to dealer greed {charging up to $7500 over MSRP] I had to drive 400 miles to northern Vermont to buy my RAV4 Prime XSE now NJ excludes me from $1050 tax benefit because I bought out of NJ even though it will be driven only in NJ. Is this the spirit of the law?

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