According to the U.S. Treasury Department and Internal Revenue Service, the federal government has given more than $1 billion in tax credits to people who buy electric cars as an upfront cash reward.
As a result of the Inflation Reduction Act, tax credits worth up to $7,500 and $4,000 could be given by car sellers at the time of sale to people who bought new or used electric vehicles.
The rule became law on January 1.
Before, people couldn’t get the federal credit until they filed their yearly tax return, which could be months or even more than a year after buying a car. Americans can now get the EV tax credit up front, even if they owe money on federal taxes. This wasn’t possible before 2024.
Wally Adeyemo, the deputy secretary of the Treasury, told the press during a call, “This has never been done before.”
He said that getting to $1 billion was a “major milestone” that was reached more quickly than planned.
He said, “Many people would rather see the savings now than wait until they file their taxes next year.”
A big part of the Biden administration’s plan to cut down on greenhouse gas pollution and stop global warming is the switch to electric vehicles.
It is the goal of the government tax credit to make electric vehicles (EVs) more affordable for many families compared to gasoline-powered vehicles.
Adeyemo said that the EV tax credits make the cars “very price competitive and in some cases cheaper than the combustion engine vehicles” that are sold on car lots.
An average electric car cost $55,242 to buy in April 2024, while a regular car cost $44,989, according to statistics from Cox Automotive. But prices are going down quickly: There was a 9% drop in the average price of new EVs in the first quarter of 2024 compared to the same time last year, the report said.
But right now, not all new EV models can get a government tax credit. This is because automakers have to meet certain manufacturing standards set by the Inflation Reduction Act. To get a full or partial EV credit, the law says that some parts of the car must be made in North America.
The U.S. Energy Department keeps a list of the latest car brands and types that can get an EV credit.
Treasury and IRS records show that since the beginning of the year, about 125,000 people have chosen to get their “new clean vehicle” tax credit all at once. They said that’s how 90% of the deals for new EVs that qualified for an advance payment worked out.
The agencies also said that 25,000 buyers have chosen to pay for the “previously owned clean vehicle” credit all at once, which is 80% of all transactions that qualify.
It’s only “a small amount” of all the EVs sold in the U.S. since the beginning of the year, Adeyemo said. They don’t include people who lease EVs or buy them in a way that doesn’t qualify for credits.
In May, Republicans in the Senate introduced a bill to end federal tax credits for electric cars. They also introduced a separate bill to end tax breaks for charging stations for electric vehicles.
Sen. John Barrasso, R-Wyo., said in a written statement about the EV bill that it “benefits the wealthiest Americans and costs hardworking American taxpayers billions of dollars.” Barrasso did not sponsor the bill himself.
When asked about these complaints about the EV tax credit, Adeyemo said that the fact that the tax break has income limits and expected lifetime savings showed that it doesn’t help the wealthiest families.
For instance, people who are single or married and make more than $150,000 or $300,000 a year can’t get a tax break for buying a new electric vehicle. The income ceilings for used EVs are $75,000 and $150,000, respectively.
There are also limits based on how much an EV costs. As an example, SUVs and smaller cars are only eligible if they cost less than $80,000 and $55,000, respectively.
Source: CNBC
