Federal tax credits of $7,500 were enacted in 2010 to help spur sales of electric vehicles, which was a priority for the Obama administration. Unfortunately they’re not permanent, and are scheduled to phase out during the calendar year after an automaker sells 200,000 EVs.
Tesla has already reached that milestone, which means if you don’t take delivery of a Model S, Model X, or Model 3 by December 31, 2018, you won’t receive the full credit. The federal tax credit on Tesla models will drop to $3,750 for vehicles sold between January 1 and June 30, 2019. It will then be reduced to $1,875 for units sold beginning July 1, 2019, and will be eliminated altogether on December 31, 2019.
General Motors is expected to be the next automaker to reach 200,000 total EV sales, and it should happen sometime during 2019. That would mean the federal tax break for the Chevrolet Bolt EV (and also the Cadillac CTS and Chevrolet Volt plug-in hybrids) would phase out beginning on January 1, 2020. Again, they’d drop to $3,750 on New Year’s Day, fall to $1,875 on July 1 and disappear on December 31, 2020.
Nissan is the automaker that's next closest to reaching 200,000 sales with the Leaf, but it's probably still a few years away from hitting that mark.
The irony here, critics say, is that eliminating the tax credit based on sales essentially penalizes automakers that were at the forefront of EV development and invested heavily in the technology early in the game. Tesla, which is as much a luxury-car brand as it is a purveyor of EVs, isn’t likely to see its sales suffer as much as would General Motors. The Bolt EV, which goes for around $28,000 after accounting for the tax credit, would effectively suffer a $7,500 price increase.
That would give the vehicle’s closest rival, the Nissan Leaf, a big advantage, Deducting the $7,500 credit, the 2019 Leaf costs around $23,400. Losing the tax break could also adversely affect GM’s future EV plans, or at the least might force the company to sell its electrified rides at a loss to remain competitive with makers whose models are still eligible for the credits.
Not surprisingly, GM and Tesla have lobbied Congress to extend the federal tax credits. A General Motors representative told Reuters that it is important “to provide a federal tax credit for consumers to help make electric vehicles more affordable for all customers.”
To that end, Representative Peter Welch, a Democrat from Vermont, introduced a bill that would replace the current sales-based system and enable a tax break for all EV buyers for the next 10 years. It would also swap the current tax credit for a direct rebate from the government. As it stands, EV buyers have to file with the IRS along with their annual income tax forms in the year after buying an EV to receive the credit. What’s more, those who pay less than $7,500 in taxes lose a portion of the incentive.
“Transportation is the single largest contributor to greenhouse emissions in the United States,” says Welch. “It is urgent that we transition to cleaner, more efficient modes of transportation. My legislation will make electric vehicles and their charging stations more affordable. We are in a race for the winner of the technology for electric vehicles and this credit is going to help spur that.”
A similar bill was proposed in the Senate by Dean Heller, a Republican representing Nevada. His legislation would likewise eliminate the 200,000-vehicle cap and allow for the full $7,500 EV tax credit through 2022. After that it would phase out for all automakers.
On the other hand, some in Washington feel the best way to handle the situation is to eliminate the tax break altogether. Senate Environment and Public Works Chairman John Barrasso, a Republican from Wyoming, has introduced a bill that would do just that. His legislation would not only immediately end the tax credit for all automakers, it would impose a new tax on EV owners (who otherwise avoid paying gasoline taxes) to fund highway repairs.
As one might expect, Senate Democrats are opposing Barrassso’s bill. “Repealing a policy that helps combat climate change is the absolute wrong decision,” says Senator Ron Wyden from Oregon.
It’s uncertain when – or if – any of these bills will come up for a vote on the floor of the House or Senate. Legislation can be slow moving as it is, and any action would likely be put on hold until after January when the full House and newly elected members of the Senate are sworn in. And with fresh blood coming to Washington, there’s no telling how this might play out.
In the meantime, act fast if you’re in the market for a Tesla or Chevrolet Bolt EV.
ABOUT THIS ARTICLE:
2016 Ford Fusion Energi Plug-in hybrid electric vehicles (PHEVs) have a battery and an electric motor. However, like gasoline vehicles, PHEVs also have a gasoline tank and an internal combustion engine (ICE).
Leather Seats, Sunroof(s), Parking Sensors, Rear View Camera, Navigation System, Front Seat Heaters, Cruise Control, Auxiliary Audio Input, Rear Spoiler, Alloy Wheels, Overhead Airbags, Traction Control, Side Airbags, Memory Seat(s), A/C Seat(s), Sync System, Air Conditioning, ABS Brakes, Power Lock...Price: $16,998 Mileage: 44,015 Location: Cheraw, SC Below average: $3,727 Total Range: 550 Mi Trim: Titanium Range 21 Mi Mileage 44,015 Location Cheraw, SC Trim Titanium Price $16,998 Below average $3,727
2019 BMW i8 Plug-in hybrid electric vehicles (PHEVs) have a battery and an electric motor. However, like gasoline vehicles, PHEVs also have a gasoline tank and an internal combustion engine (ICE).
Leather Seats,Navigation System,Keyless Start,Bluetooth Connection,Heads-Up Display,Convertible Soft Top,All Wheel Drive,GIGA AMIDO; FULL PERFORATED LEATHER UPHOLSTERY,SOPHISTO GRAY METALLIC W/FROZEN GRAY ACCENT,WHEELS: 20" X 7.5" FR & 20" X 8.5" RR W SPOKEPrice: $164,295 Mileage: 10 Location: Buena Park, CA Below average: $2,153 Total Range: 320 Mi Trim: - Range 18 Mi Mileage 10 Location Buena Park, CA Trim - Price $164,295 Below average $2,153
2019 BMW 5 Series Plug-in hybrid electric vehicles (PHEVs) have a battery and an electric motor. However, like gasoline vehicles, PHEVs also have a gasoline tank and an internal combustion engine (ICE).
MOCHA; NAPPA LEATHER UPHOLSTERY,CONVENIENCE PACKAGE,HEAD-UP DISPLAY,HARMAN/KARDON SURROUND SOUND SYSTEM,MULTI-CONTOUR SEATS,WHEELS: 19" X 8" FR & 19" X 9" RR V-SPOKE,DARK GRAPHITE METALLIC,Sun/Moonroof,HEATED FRONT SEATS,Leather Seats,POWER TAILGATE,Navigation System,Keyless Start,Bluetooth Conn...Price: $62,435 Mileage: 10 Location: Buena Park, CA Above average: $3,682 Total Range: 404 Mi Trim: 530e iPerformance Range 16 Mi Mileage 10 Location Buena Park, CA Trim 530e iPerformance Price $62,435 Above average $3,682
2019 Toyota Prius Prime Plug-in hybrid electric vehicles (PHEVs) have a battery and an electric motor. However, like gasoline vehicles, PHEVs also have a gasoline tank and an internal combustion engine (ICE).
Navigation System,PREFERRED ACCESSORY PACKAGE,ALL-WEATHER FLOOR LINER PACKAGE,LOWER CONSOLE/SHIFTER APPLIQUE PACKAGE,Lane Keeping Assist,Keyless Start,Bluetooth Connection,Heads-Up Display,50 STATE FEDERAL EMISSIONS,ADVANCED PACKAGE,BLACK; SOFTEX SEAT TRIM,CLASSIC SILVER METALLICGet pre-approved for...Price: $35,006 Mileage: 10 Location: Centennial, CO Above average: $442 Total Range: 59 Mi Trim: Advanced Plug-in Hybrid Range 25 Mi Mileage 10 Location Centennial, CO Trim Advanced Plug-in Hybrid Price $35,006 Above average $442
SIGN UP TO OUR MAILING LIST
Change Your Location
FREE ONLINE APPRAISAL