The US Congress, currently controlled by the Democrats, is considering a slew of tax incentives and tax increases amid annual federal budget negotiations.
A vote is pending on a $3.5 billion budget resolution, and while the Democrats are not keen to discuss proposed tax increases (which we’ll discuss soon), they are happy to trumpet possible tax incentives.
One of which includes a potential tax credit on the purchase of US-made electric vehicles. So, what’s this credit all about? Let’s take a closer look…
Origins of The Electric Vehicle (EV) Tax Incentive
Environmental protection is a pillar of the Biden Administration policy goals. And one key component of this policy push is ensuring electric vehicles make up at least 50% of all cars on US roads by 2030.
The Current EV
CreditWhat you may not have realized is there’s already a sizable tax credit for driving an electric vehicle.
If you’re currently driving a “zero-emissions” vehicle, you’re likely eligible for a $7,500 annual tax credit.
The Proposed Tax Incentive Increase For US-Made Electric Vehicles
As part of the upcoming budget, the current EV incentive would increase to a $12,500 annual tax credit IF you purchase a US-made elective vehicle.
Additional Benefits Prompting a US-Made EV Tax Credit
On top of cutting taxpayers a break for making an environmentally prudent choice, the Biden administration also aims to boost US electric vehicle manufacturing.
While US car companies make roughly 65% of all cars sold in the US annually, US automakers only account for 2.5% of the electric vehicle market.
Of course, this is also a politically savvy move. The incentive throws a sizable bone to both the “Big Three” US car manufactures and the UAW (United Auto Workers Union), which currently reigns as the world’s largest and most powerful labor union.
US-Made EV Tax Credit Criticisms
A dozen foreign automakers manufacture a good percentage of their cars in the US and employ US labor in these domestic plants.
In fact, nearly half of the “foreign” cars sold in the US, which makes up about 45% of all US car sales, are actually made in the states.
Understandably, these companies object to a tax credit that favors domestic vehicles when so many of their cars are made in the US by US autoworkers.
Have Questions About The EV Tax Credit or Other Auto-Related Tax Incentives?
Both the current and proposed EV tax credits are pretty straightforward. There are, however, a variety of automotive-related tax credits. And depending on your financial status, it could be worth exploring your options.
If you have questions, I encourage you to get in touch for a FREE consultation!