Electric Cars That Qualify For Tax Credit – Laurie Mueller needed a new car. It’s 2019, and Mueller, a 56-year-old freelance motion graphics designer, has “crashed” his 20-year-old Dodge Plymouth Neon. In recent years, he’s gradually moved to a greener lifestyle — solar panels, reusable shopping bags, even an electric snow blower — so he needed a car that runs on batteries. A new $40,000 Nissan Leaf was the solution to his birthday present because he had one incentive: a $7,500 credit on his federal taxes.
But Mueller was in for a nasty surprise. This “tax credit” was not equal to what was owed to the federal government and was only $3,829 in 2019. The car cost thousands of dollars more than expected.
Electric Cars That Qualify For Tax Credit
Mueller is not alone. According to a study by researchers at the University of California, 13 percent of electric vehicle owners overestimated the amount of money they would get back to buy one. His experience highlights a larger problem with the government’s primary strategy for consumer EV adoption: The people who benefit the most are the people who spend the most.
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Electric vehicles have long been seen as key to transitioning the U.S. economy away from fossil fuels: Many Americans love cars to be able to ditch their personal cars, and the country is too short on highways and suburbs to switch to a full public transit system. On a European scale. (Sorry, mass transit advocates.) Electric cars powered by clean electricity could help reduce US transportation emissions by 28 percent.
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However, it has been difficult to get Americans to buy an electric car. EVs have been around forever, the first in the US dating back to 1890, but adoption has been slow. Even today, electric cars cost thousands of dollars more than their gas counterparts (even accounting for the difference in maintenance and fuel costs), and many people fear that some of their cars will run out of gas. power after a few hundred kilometers. Between 2011 and 2019, less than 1 percent of cars sold in the United States were electric.
A tax credit should help. The program, started under President George W. Bush and expanded in President Barack Obama’s 2009 recovery law, gives buyers of a new electric car (or plug-in hybrid) a credit when they pay their taxes next year. Battery scales by size: A 16-kWh battery (like the now-defunct Chevy Volt) is eligible for a maximum of $7,500.
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But car buyers must earn at least $66,000 a year — and have no other significant debt — and pay enough taxes to qualify for the full benefit. One reason the program helped wealthier Americans so much: According to a Congressional Research Service analysis, people making at least $100,000 a year claimed 78 percent of the deposits; Those earning at least $1 claimed 7 percent
“It’s starting to become a major problem,” said Gil Thal, director of the Plug-in Hybrid and Electric Vehicle Research Center at the University of California, Davis. A decade ago, electric cars were only luxury items purchased by the wealthy, he said, but as affordable models hit the market, the middle-income tax credit could disrupt the EV boom. Those buyers don’t want to take on heavy credit or know how much they’ll earn in the coming year while they wait for the loan to come in.
This is the story of Gene Cowan, a 56-year-old graphic designer from California who saved up to buy a 2018 Tesla Model 3. He was expecting a $7,500 federal tax credit and another $3,000 in state credits. But after a year of freelancing, she had nothing to pay in federal income taxes and lost her California benefits when she had to move to Washington to care for a sick relative. “It’s crazy,” he said. “I didn’t get it because I wasn’t rich enough. This is crazy.
The financial incentive should get Americans to buy EVs they might not otherwise want, especially middle-class Americans. But credit was the most important factor for 17 percent of electric vehicle buyers in 2015, according to a study in the journal Energy Economics. However, 83 percent would buy a new car. Other analysts have indicated that credit can take up more than 30 or 40 percent of sales.
How To Claim The $7,500 Electric Vehicle Tax Credit And Which Cars Qualify For It
“If I have a higher income, I’ll buy a Tesla or a Volta and I’m willing to pay full price,” said Tamara Sheldon, author of the Energy Economics study and an economics professor at the University of South Carolina. “But if you’re going to give me a tax credit or a credit, I’m not going to turn it down.”
There is at least one way for middle-income Americans to drive an electric car. Tal, a UC Davis researcher, says drivers interested in EVs can always lease — the federal tax credit goes to the dealer who offers customers a lower lease rate. This approach is very popular: 75 percent of electric vehicles are leased rather than purchased.
But when it comes to buying an electric car, Jay Friedland, executive director of the advocacy group EV Plug in America, thinks one way to solve the equity problem is to “bumper” the loan. That is, take $7,500 directly off the car’s sticker price. It may be more difficult politically—it’s easier to pass the tax credit directly through Congress—but it will allow more Americans to take full advantage of the program. (A version of this already exists in California, where residents can get $1,500 off a new EV at the dealership.)
Another option is a similar loan for used electric cars. In Oregon, low- and moderate-income buyers can get a $2,500 rebate on a used electric car; the state ranks third in the country for sales and leases of electric cars. If Congress were to introduce a $7,500 tax credit for used cars, it could accelerate adoption among people who don’t have the money to buy a new electric vehicle.
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All of these ideas will be debated in Congress in the coming months. President Joe Biden has been a pillar of his campaign to increase the number of electric vehicles – he promised in the Democratic debates to build “500,000 charging stations” across the country – and car companies want to rebuild the program. The current credit only applies to the first 200,000 cars sold by a particular car company, and Tesla and General Motors have already met their quota. (Nissan and Toyota are also approaching.)
Any new legislation would raise those quotas, but could help middle-income buyers afford electric vehicles. Senate Majority Leader Chuck Schumer has drafted a bill similar to Obama’s “cash for clunkers” program that would provide money for old gas-guzzling cars and help buyers of used EVs. Sen. Jeff Merkley of Oregon and Rep. Peter Welch of Vermont propose removing the cap for automakers over the next 10 years and using the credits directly to dealers. The REASHIK Act, currently sponsored by 49 members of Congress, would increase the number of cars per company to 600,000 and add a used car loan.
Whatever strategy Congress chooses, many hope it will be easier to fight than the current system. Mueller, who loves the Nissan Leaf’s easy maintenance and quiet engine, is disappointed by the tax experience. “If you want to inspire people to do something, you have to keep it simple,” he said. It should not be on the basis that “there were no such deductions that year”.
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