The Federal EV Tax Credit is working to help Americans ditch their old gas and diesel vehicles in favor of new and used electric vehicles.
Most of what we’ve heard, read about, and reported is the slower growth in the EV world compared to 2023. That doesn’t mean there isn’t growth among electric vehicles, its simply not as significant as some automakers would like. Those automakers should take solace in the amount of EV credits that have been issued to consumers this year. Those figures show impressive growth in the market that should continue as more vehicles transition to electric powertrains.
How much does this add up to?
Since January 1, 2024, the U.S. government has issued $2 billion in advanced point-of-sale consumer electric vehicle tax credit payments, according to Reuters. This means more than 300,000 vehicles have had this credit applied to them, showing a significant number of drivers switching to electric vehicles while getting out of their old gas and diesel models. The new rules are stricter for automakers but make it much easier for consumers to take advantage of this credit and receive the savings desired to reduce the cost of electric vehicles, which are typically more expensive than their gasoline-powered counterparts.
How does this total break down?
The number of vehicles taking advantage of the Federal EV Tax Credit breaks down to more than 250,000 credits issued for new EVs and nearly 50,000 credits for used models. Used vehicles carry up to $4,000 in credits, while owners of new credits can enjoy up to $7,5000 at the point of sale. These credits are almost entirely transferred to the car dealer at the time of purchase. These credits are much better than the previous credit, which was a reduction in tax liability, which wasn’t nearly as attractive to most shoppers.
No limits on the federal tax credit
The previous version of this tax credit capped the total number of vehicles for a manufacturer at 200,000 models. This was a problem for Tesla, GM, and Toyota, which all reached the figures before the Inflation Reduction Act of 2022 was approved. Thankfully, this new law removed the cap on credits, which helps all automakers sell EVs. There are other restrictions on the credit, but not a total cap that automakers would have to be concerned about. Considering the goal to reach 50% sales of EVs by 2030, putting restrictions on automakers isn’t a constructive part of the old credit.
Battery production moves to the United States
It’s not a secret that most Americans and our basic way of thinking doesn’t align with China, but we still receive many products from China. Part of the Inflation Reduction Act is to move EV and battery production away from China and into countries that are allied with the United States. In fact, EVs that are purchased can only be assembled in North America to qualify for the credits. This means you can’t buy an EV from most foreign brands that assemble their vehicles in other countries.
Significant savings over a lifetime
The Office of Economic Policy estimates owners of electric vehicles will experience significant savings compared to owners of gas-powered vehicles. Not only are these new EV drivers benefiting from the Federal EV Tax Credit, but they could save between $18,000 and $24,000 over the course of a 15-year lifespan of one of these vehicles. These savings take into account the fluctuating gasoline prices compared to the price of electricity and the frequency of maintenance visits required for gas-powered vehicles compared to EVs.
Income requirements for the tax credit
The Inflation Reduction Act is meant to benefit middle class Americans and not those with high income. This means any consumer purchasing a new or used electric vehicle must make less than $150,000 as an individual or $300,000 for married couples. This means most consumers will qualify for these credits, which are reserved for them.
Could 2025 see more EV credits?
Although we don’t know the total number of EV credits that will be issued before the end of the year, this figure should be much greater next year. Most automakers are adding more EVs to their lineups, which means more new electric vehicles and more used models are available in the market. Eventually, the goal is to have as many Americans driving electric vehicles as possible, and the Federal EV Tax Credit is a great way to make that happen.
This post may contain affiliate links. Meaning a commission is given should you decide to make a purchase through these links, at no cost to you. All products shown are researched and tested to give an accurate review for you.