The latest political developments in Washington D.C. could once again make EVs from Tesla and other automakers eligible for a consumer tax credit.
The latest political developments in Washington D.C. could once again make electric vehicles from Tesla and other major automakers eligible for a federal tax credit. The U.S. government offers a tax credit of up to $7,500 on the purchase of electric vehicles, but the benefit is only available to select automakers due to the way it is structured. The credit is only available on products from automakers that have sold less than 200,000 EVs, meaning it applies to a vehicle like the Rivian R1T, but not to the Tesla Model 3, Chevy Bolt, or Toyota bZ4X.
Some states like California also offer their own incentives to people opting for clean fuel vehicles as part of its Clean Vehicle Rebate Project (CVRP). Tesla has been the beneficiary of those rebates for years, with its Model 3 and Model Y enjoying sizeable discounts in the state until recently. However, after the multiple price hikes this year, neither vehicle is eligible for the rebate anymore, as both have crossed the threshold for California’s subsidized EV pricing. California’s rebate applies to clean fuel cars with an MSRP of up to $45,000, while for SUVs, trucks, and vans, the cap is currently set at $60,000.
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According to Reuters, a breakthrough deal between Senate Majority Leader Chuck Schumer and West Virginia Senator Joe Manchin on a major tax and climate bill will allow the Biden administration to extend the $7,500 consumer tax credit for the purchase of clean-energy vehicles. The bill, which includes provisions to spend about $369 billion on climate and clean energy, would also enable pre-owned car buyers to receive up to $4,000 in tax credits for used clean cars.
Tax Rebates On EVs To Be Extended
According to the bill, the clean fuel rebate will be available on sedans priced up to $55,000, as well as vans, SUVs, and trucks with MSRPs up to $80,000. However, there are some major conditions for eligibility, which means the benefits will not be available to everyone and on all EVs that fall within the aforementioned price range. Firstly, the tax credit will only be available to individuals earning $150,000 or less, or up to $300,000 for joint filers.
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In addition, eligible cars can only include minerals that are extracted or processed in a country that has a free trade agreement with the U.S. The battery in these cars also needs to include a large percentage of components that were manufactured or assembled in North America. Eligible consumers buying such vehicles would receive their discounts at the point of sale rather than having their taxes adjusted at the end of the year. While multiple GM vehicles like the Chevy Blazer and the Bolt will be eligible for the credits, only a few Tesla Model 3 variants will be eligible due to the new $55,000 price limit.