Electric Vehicle Rebates for Consumers & Businesses Explained

Hand plugging in electric car charger.

Electric Vehicle Rebates for Consumers & Businesses Explained

Carol Jackson, CPA, CA
Senior Manager, Tax & Advisory Services

With the high price of gasoline, COP26 and recent heat and flooding disasters in BC fresh in everyone’s mind, many consumers may be considering purchasing an electric vehicle. Through the federal government’s Incentives for Purchasing Zero-Emission Vehicles (iZEV) program, consumers may be eligible for a big discount off the Manufacturers’ Suggested Retail Price (MSRP) on many new electric vehicles (EV) and plug-in hybrids.  The iZEV program launched May 1, 2019 and has garnered interest across the country.

Eligible Vehicles

New vehicles up to 6-seats, where base model MSRP is under $45,000 (or higher models up to $55,000)

New vehicles with 7 or more seats, where base model MSRP is under $55,000 (or higher models up to $60,000).

Vehicles are still eligible even where additional costs (delivery, freight, accessories, options) cause their total price to exceed these MSRP limits.

Note: eligible EVs that are test-drive/demos at dealerships may qualify as long as the odometer reads less than 10,000 km.

Find out if your desired vehicle qualifies on Transport Canada’s list of eligible vehicles.

Two Levels of Federal Incentives

Battery-electric, hydrogen fuel cell, or long-range plug-in hybrid are eligible for up to $5,000;

Plug-in hybrid electric, short-range vehicles are eligible for up to $2,500;

Range is determined by vehicle battery capacity with at least 15 kilowatt-hours considered longer range and those with less than 15 kWh considered short range.

Full rebates are available on purchase, or long-term (48-month) lease.  Shorter leases of at least 12 months are eligible for a prorated rebate.

Best of all, the discount received through the iZEV program is applied directly by the dealership at the point of sale or lease. Individuals are eligible for one iZEV incentive per calendar year.

EVs for your Business

Businesses purchasing or leasing new electric vehicles can also take advantage of the iZEV program by applying the rebate at the time of purchase or lease. Businesses are eligible for up to 10 such incentives per calendar year.

For purchased vehicles, the net cost would be available to businesses to depreciate under the normal rules, $30,000 capital cost limit and rates of depreciation applicable to passenger vehicle classes.  Alternatively, businesses can opt to forego government rebates and instead utilize one of the new depreciation classes for electric vehicles introduced in the 2019 federal budget.

The new classes for zero-emission vehicles offer an enhanced 100% write-off in the first year of ownership, up to $55,000 plus tax, subject to class-specific rules, but be aware of the tax cost of greater recaptured depreciation that may apply at disposal with this full write-off option. Recapture occurs when previously expensed depreciation is brought back into income for tax purposes when the vehicle is disposed of for more than its undepreciated balance. The 100% write-off option is set to phase out beginning 2024.

For GST/HST purposes, the usual cost limit of $30,000 on which GST/HST may be recovered through input tax credits is similarly increased to $55,000 for EVs used for business.

Determining which option makes the most financial sense will depend on the class of the vehicle for depreciation and the intended lifespan of business use of the vehicle. Your GGFL accountant can help you assess which option makes the most sense for your business.

When to Purchase?

In addition to the Federal incentives, residents of Ontario and Quebec should be aware of the additional incentives that may be available to them:

Ontario Residents

The Ontario provincial rebate program for electric vehicle purchases was cancelled shortly after the Ford government was elected in 2018. At the time, the provincial program offered rebates of up to $14,000 for fully electric vehicles.  With Premier Ford now making a strong push for the electric vehicle industry in Ontario, it will be interesting to see if rebates are added into the PC platform for the June 2022 election. The provincial Liberal election platform promises an additional rebate of $8,000 for new purchases or leases for EV vehicles that meet the Federal incentive requirements.  Keep an eye on each party’s election platform and the Ontario election results if an electric vehicle purchase is on your shopping list for 2022.

Quebec Residents

Residents of Quebec are currently eligible for rebates of up to $8,000 on the purchase or lease of a new electric vehicle with a MSRP below $60,000. Other rebates apply to the purchase of used EVs, and charging stations for homes, multi-unit buildings and businesses. More details on Quebec’s incentive program can be found here.

Other Costs to Consider

While regular trips to the gas pump will become a thing of the past when purchasing an electric vehicle, there are some other up-front costs to keep in mind. All electric vehicles can be charged using a standard plug, but the time it takes to charge a car using a standard plug is very slow. For a faster charge, a level 2 charger is recommended for home use. The cost of a charger and installation can be a few thousand dollars. Check to make sure your home’s electrical panel can handle the new high voltage demand.  Often, homes with a 100 amp panel will require an upgrade to 200 amps. There are many different options out there for setting up your home charging station so do some research to see which one fits your needs and circumstances the best. More details on charging options can be found on the Plug’n Drive website.