EV Tax Credit Could Reach $12,500

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Automotive Editor

Based out of the Washington, D.C. area, Joel Patel is an automotive journalist that hails from Northern Virginia. His work has been featured on various automotive outlets, including Autoweek, Digital Trends, and Autoblog. When not writing about cars, Joel enjoys trying new foods, wrenching on his car, and watching horror movies. 

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, Automotive Editor - May 28, 2021

Currently, consumers looking to purchase an electric vehicle are eligible for a federal tax credit with a maximum value of $7,500. With modern electric vehicles costing more than their counterparts with an internal combustion engine, $7,500 doesn’t go that far. A new legislation called the Clean Energy for America Act that recently passed the U.S. Senate Finance Committee could potentially raise the maximum federal credit to $12,500. But as with many political things, it’s not straightforward and there’s a chance that it might not go much further, as a Senate vote is next.

The new legislation retains the $7,500 federal tax credit, but brings more money depending on a few factors. If a vehicle is assembled in the U.S., the federal tax credit adds an additional $2,500. Another $2,500 is given if the plant’s workforce where the vehicle is assembled is represented by a union. Together, these caveats would raise the available tax credit to $12,500, but the extra $5,000 is out of consumers’ hands.

Under the new legislation, General Motors would benefit the most. The automaker currently assembles the Chevrolet Bolt EV in Michigan and has UAW workers that assemble the vehicle. Tesla would also benefit from the legislation, as the automaker assembles the Model Y and Model 3 in the U.S., though its workforce does not have a union. The new legislation would be a mixed bag for Ford, as the Mustang Mach-E is built in Mexico. The all-new 2022 Ford F-150 Lightning would be eligible for the full $12,500.

Ford F-150 Lightning

One other caveat with the new legislation is that the federal tax credit only applies to vehicles that carry an MSRP that’s less than $80,000. Any electric car over that price would not be eligible for any amount of the federal tax credit. So, consumers shopping for an upscale EV would not be able to get any tax credit for the vehicle.

Lastly, the federal cap on electric vehicles sold would be removed. At the moment, only GM and Tesla have reached the current 200,000 cap, which triggered a phase-out of tax credits for interested buyers. Tesla and GM’s electric cars aren’t eligible for any amount of the current $7,500 federal tax credit. Instead, the phase-out period of the new legislation would begin once EVs make up 50% of an automaker’s annual sales figures. In the first year, the federal tax credit would be cut by 25%, then by 50% in the second year, and completely by the third year.

The Clean Energy for America Act would be a great thing for consumers looking to purchase an electric vehicle. More automakers are starting to come out with affordable EVs and the new legislation would give shoppers the ability to get extra money for buying something that’s affordable and assembled in the U.S. The only problem that we can see with the new legislation is that it leaves $5,000 up to the automaker. It’s highly unlikely that Ford would shift production of the Mustang Mach-E to the U.S. to save consumers an extra $2,500, just like the chances of Tesla letting its workers unionize to save shoppers $2,500 is a shot in the dark.

The Senate Finance Committee advanced the legislation on a 14-14 part-line vote, despite the tie. Since the Senate is evenly divided, it’s unclear how the upper chamber of Congress will vote on the legislation. It will also be interesting to see how the new legislation would work with President Biden’s $2 trillion infrastructure plan.

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, Automotive Editor

Based out of the Washington, D.C. area, Joel Patel is an automotive journalist that hails from Northern Virginia. His work has been featured on various automotive outlets, including Autoweek, Digital Trends, and Autoblog. When not writing about cars, Joel enjoys trying new foods, wrenching on his car, and watching horror movies. 

Follow On: Twitter

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