Who doesn’t love a good discount?
Here in Texas, we have something we call “tax free weekends.” For that weekend, sales taxes are waived, so when people flock to the store to buy, say, their school supplies, they’re explicitly paying the tag price without any taxes added on top. But what if you could do that with your car?
Well, if you’re buying an electric vehicle, you can. The United States government already offers tax credits on all electric purchases, so when you get your yearly tax refund, you’ll get a whole heaping pile of money back. It’s almost like getting paid to buy a new car!
Right now, if you buy electric, you get a $7,500 tax credit. That’s not bad. But Congressional Democrats have introduced a new proposal that would make it possible to get even more money off your EV purchase. And who doesn’t love that?
More Money Off
If this proposal becomes law, you could get up to $12,500 off your next electrical vehicle purchase… within certain boundaries. The full $12,500 would only qualify for union-made EVs that are assembled in America. But if you’re looking at something European-made, don’t worry; the $7,500 tax credit hasn’t changed. This is just America’s way of incentivizing homegrown purchases.
Here’s how the tax credits break down:
- All EVs will have a base tax credit of $4,000
- If your EV has a battery of at least 40 kWh, you’ll get another $3,500 off
- If that EV is manufactured in a unionized American facility, you get an additional $4,500
- Another $500 off if more than half of the vehicle is made in America
There’s also a clause in the bill that gives you a tax credit of up to $2,500 for road-legal electric two- or three-wheeled vehicles that can go faster than 45 mph. That means electric bikes and motorcycles.
That’s not bad, right?
Used Electric Vehicle Credits? Yes, Please!
New EVs aren’t the only vehicles eligible for tax credits. If you want to buy an older, used electric car after the 2027 start date of this proposed bill, you’d be eligible for a tax credit of $1,250 to $2,500, depending on the size of the battery. There are also a few limitations on that one:
- The vehicles must be made by a manufacturer whose electric vehicles were already eligible for tax credits when new.
- The used vehicle can’t cost more than $25,000.
- It must weigh less than 14,000 pounds.
- It has to have a battery of 7 to 10 kWh, depending on the year of manufacture.
- It has to be two or more years old.
There Are Cost Caps and Income Caps…
That said, these tax credits aren’t just for everyone. You aren’t eligible for the full new EV tax credit if:
- You earn over $800,000 in a joint-filing family
- You earn over $600,000 as head of a household
- You earn over $400,000 as a single person
In addition, there are cost caps on the kinds of vehicles you can buy. So, if you buy a new EV with a sale price over the following figures, you’re no longer eligible for the tax credit:
- Sedans: $55,000
- Vans: $65,400
- SUVs: $69,000
- Pickup trucks: $74,000
There are also limits on the tax credits for used vehicles. There, you have to have a family income of less than $150,000 or a single income of less than $75,000. That used EV also has to be worth less than $25,000.
But No Limits on Sales
Previous electric vehicle proposals wanted to place limits on the number of EVs an auto company could discount for. So, once a company sold 200,000 vehicles, that company’s cars were no longer eligible for the tax credits. In that previous scheme, both Tesla and General Motors vehicles would be ineligible for the credits.
In this proposal, however, there are no limits on the number of cars an automakers sells. So your Teslas and your GM cars will still be tax deductible.
But It’s Not a Law Yet
Keep in mind that, right now, these EV tax credits are just proposals, not laws. That means that we could see these plans in action, but there’s still a long way to go to get there.
That being said, it does signal a promising direction for electric vehicles, namely the fact that lawmakers are interested in maintaining significant tax credits as we transition from the conventional gasoline engines to electric power.
It’s also important to note, too, that these are tax credits. So, when you go to buy your EV, you’ll be able to get this money back when filing taxes. It is not an immediate discount off the sale price of the vehicle.