The PA EV Tax Credit: How the State Rebate Program Works

Pennsylvania does not offer a state tax credit for electric vehicle (EV) purchases. Instead, the Commonwealth provides the Alternative Fuel Vehicle (AFV) Rebate Program. A rebate is a direct cash payment sent to the consumer after purchase, whereas a tax credit reduces state income tax owed. The current round of rebates is available from September 1, 2024, through June 30, 2025, or until funding is depleted.

Pennsylvania AFV Rebate Eligibility

Applicant Requirements

To qualify for the AFV Rebate, an individual must be a Pennsylvania resident. Eligibility is tied to the applicant’s household income, which must be below 300 percent of the Federal Income Poverty level. For a single-person household, the maximum income is $45,180, while a two-person household has a limit of $61,320. These figures adjust based on the number of people in the household.

The program offers an additional incentive for lower-income households. If a household’s income is below 150 percent of the federal poverty guideline, they can receive an extra $1,000. For a single-person household, this threshold is $22,590, and for a two-person household, it is $30,660. This means a qualifying BEV purchase could result in a total rebate of $4,000.

Vehicle Requirements

The program covers new and pre-owned vehicles, including Battery Electric Vehicles (BEVs) and Plug-in Hybrid Electric Vehicles (PHEVs). The standard rebate for a qualifying BEV is $3,000, and a PHEV is eligible for a $1,500 rebate. Other alternative fuel vehicles, such as those powered by natural gas, propane, or electric motorcycles, may qualify for a $500 rebate.

The vehicle’s final purchase price cannot exceed $45,000, which applies to purchased, leased, and demonstration vehicles. To qualify, a used vehicle must have an odometer reading of 75,000 miles or less, and a demonstration vehicle must have a reading between 500 and 10,000 miles. The vehicle must be purchased and registered in Pennsylvania to the applicant.

Required Information for Application

Before applying, you must gather information from several documents. The Pennsylvania Department of Environmental Protection (DEP) requires details from the following:

• A valid Pennsylvania driver’s license
• The vehicle’s permanent Pennsylvania registration
• The final bill of sale or lease agreement
• Your most recent PA-40 state income tax return to verify income

You will need to accurately transcribe information such as the Vehicle Identification Number (VIN), purchase date, final price, and personal details as they appear on your documents.

The Application Submission Process

Applications must be submitted online through the Department of Environmental Protection (DEP) eGrants system within six months of the vehicle’s purchase or lease date. The DEP processes applications on a first-come, first-served basis, and timely submission is advised as funding is limited. Ensure all entered information is accurate, as incomplete applications will not be approved and must be resubmitted within the original six-month window.

Once an application is approved, the rebate is issued directly to the applicant as a physical check sent to the mailing address on the form. This rebate is considered taxable income, and you may receive a 1099 form for the tax year it was received if the amount is over $600.

Combining with the Federal EV Tax Credit

In addition to the state-level rebate, Pennsylvania residents may also qualify for a separate federal tax credit for clean vehicles. This federal incentive is a non-refundable tax credit, meaning it can lower or eliminate your federal income tax liability for the year of purchase, but you will not get any of it back as a refund beyond your tax liability. The maximum federal credit can be up to $7,500, depending on the vehicle.

Federal criteria are separate from the state rebate and include:

• Limitations on the buyer’s modified adjusted gross income
• Caps on the vehicle’s Manufacturer’s Suggested Retail Price (MSRP)
• Requirements for the vehicle’s battery capacity
• Sourcing rules for battery components and critical minerals

These rules are complex and subject to change.

It is possible to qualify for both the state rebate and the federal tax credit for the same vehicle. Because the federal rules are updated regularly, consult the official IRS and U.S. Department of Energy’s FuelEconomy.gov websites for the most current information.

Future Considerations for EV Owners

Pennsylvania EV owners should be aware of a new Road User Charge (RUC) that will take effect on April 1, 2025. This annual fee is being implemented to ensure that electric vehicle owners contribute to the upkeep of the state’s roads and bridges, similar to how gasoline taxes fund this maintenance for traditional vehicles.