Currently, if you want to buy an electric vehicle (EV), there’s the potential for a tax credit of $7,500. Woohoo, right? Well, it’s great if you actually have a tax burden of $7,500. Oh, and certain automakers like GM, Toyota, and Tesla? Yeah, their vehicles are no longer eligible for the credit because they started selling tons of EVs (Or hybrids in Toyota’s case) before everyone else. Yep, punishing companies for doing the right thing early is weird. So it’s mostly worked for years. You buy an EV. Later, when you file your taxes, you get a sweet credit. Sure it’s been mostly used by the wealthy as they gobble up the Model S, but the reality is, it got EVs on the road. But now we need a change, and this bill does just that.
Goodbye Tax Credits, Hello Real Credits
The biggest complaint about the current system is the tax credit portion. Buying an EV, you still have to pay the car payment on the full price. Sure, you get the tax credit that, hopefully, you can use to get a refund from the government to help pay down your loan, but the reality is, sometimes that doesn’t work out. This bill changes all that, and buyers get up-front credits. So if you’re buying a $40,000 vehicle, right when you buy that car, the credit is applied, and now you’re paying (pulls up calculator app) $32,500, and the car payment is based on that amount. Of course, in many places, there are also state and local credits that can be applied, but right now, we’re just looking at the federal credit system. Oh, and that cap on vehicles sold makes some automakers’ electric cars, trucks, and SUVs no longer eligible. That goes away. So if you’re in the mood for a Model 3 or Chevy Bolt, you get the same credit you would use if you were in the market for a Hyundai Ioniq 5. Instead, the credits will be phased out in 2032, which makes more sense than the weird vehicle sales cap.
Used EV Credit
Another great boost to making EVs affordable for more people is the used EV credit provision. Currently, if you buy a used EV, you pay the sticker price or whatever the dealership will let you get away with after 12 hours of haggling. Under the climate bill, there is a tax credit of $4,000 for used EVs. So if you’re in the market for a BMW i3, you could buy one and have a sweet $4,000 credit on your taxes. So it’s not the instant rebate of a new car, likely because of all the paperwork required, especially for private sales. A dealership can handle the paperwork to sell a new EV, the person down the street selling a Leaf probably doesn’t want anything to do with that tangled web of bureaucracy.
New Rules
This all sounds great. But there are new rules. Many of which really are to reduce the wealthy from using these credits to buy $150,000 EVs. If you can afford an EV that costs over $100,000, you really don’t need a government incentive. You’re rich; you have fancy accountants to help you figure out how to save money. For the rest of us, in order to be eligible for these credits, there are new income level caps. For the purchase of a new vehicle, they are as follows: For a single filer, it’s $150,000. For joint filers, the cap is $300,000. For used-vehicle purchases, the cap drops to $75,000 and $150,000, respectively. The cost of the vehicle now matters as well. The sticker price cap for new cars is $55,000, while the cap for SUVs and trucks is $80,000. In other words, if something costs $56,000, get ready for the automaker to call it an SUV to qualify for the credits. It’s a weird rule that continues to place SUVs and Trucks (which are typically less efficient) over EV sedans.
I’m Just a Bill
We’ve likely all seen the Schoolhouse Rock “I’m Just a Bill” cartoon. That’s what has to happen right now. So don’t run out to your local dealership this weekend ready to throw down some cash on a now less expensive EV. The bill still has to pass the senate and the house; during that process, it could be amended to change some of the above provisions. Hopefully for the better, but that’s not usually how these things work, unfortunately. Once that happens, the president signs the bill, and then there’s a big party on the capitol steps. Or at least that’s what I’ve been led to believe by Schoolhouse Rock. If that doesn’t actually happen, those that have been wanting to purchase an EV but have been holding off because of costs could be one step closer to making that happen. That’s got to be a reason for someone to party somewhere.
