This year’s presidential election spotlighted many tax issues and perspectives, including the EV tax credit.
The federal tax credit of up to $7,500 for new eligible vehicles and up to $4,000 for used EVs came as part of the Inflation Reduction Act (IRA), which in the past two years, has spurred investment from EV manufacturers.
According to recent data, battery manufacturing alone is estimated to account for $133 billion (nearly 60%) of allocated electric vehicle investments.
The Democratic nominee, Vice President Kamala Harris has supported clean energy investments. (Harris and the Biden administration have pushed for EV adoption and efforts to combat climate change.)
Meanwhile, former President Donald Trump, says he plans to end the EV tax credit and repeal the Inflation Reduction Act.
During his speech at the Republican National Convention, Trump told supporters, “I will end the electric vehicle mandate on day one.”
(It should be noted that there is no federal EV mandate. However, some believe that Environmental Protection Agency (EPA) emissions standards and a broader Biden administration climate plan prioritize EV production,)
So how did the electric vehicle tax credit become such a topic of political debate, and what could the election outcome mean for you, if you’re in the market for an EV?
Related: Will EVs Drive the Vote in Election 2024 Swing States?
What happens to the EV tax credit post election?
If buying an EV is important to you, here is a brief highlight of the candidates’ stances this election year that could impact the federal tax credit.
Of course, what eventually happens with the credit will also depend on the balance of power in the U.S. Congress.
Kamala Harris. The Biden-Harris administration enacted the Inflation Reduction Act. So, Harris would have continued to invest in infrastructure (like EV charging stations) and research and development for electric vehicle technologies.
Donald Trump. In addition to Trump’s call for an end to the EV tax credit and repealing the IRA, Trump’s running mate Sen. J.D. Vance (R-Ohio) proposed a “gas tax credit” for gasoline-powered cars. The tax break would provide up to $7,500 for new diesel or gas vehicles.
Trump has also vowed to raise tariffs on Mexican-made cars while requiring Chinese companies like BYD to build their EVs domestically. This could lower BYD production and keep Tesla the top EV producer in the United States.
Tesla
Additionally, Donald Trump has said he would hire Elon Musk, whose company Tesla is a leading producer of EVs in the U.S., as a White House advisor. During a campaign speech in New York, Trump introduced the concept of a "government efficiency commission" he says would be led by Musk.
The announcement came as Trump pledged to cut the corporate tax rate to 15% for companies making products in the U.S.
Are EV tax credits worth it?
Of the billions of dollars in tax credits in the IRA, the EV tax credit is one of the more well-known. The credit is worth up to $7,500 for eligible buyers of new qualifying vehicles and up to $4,000 for qualified buyers of used EVs. To date, the U.S. Treasury Department says buyers of electric cars have saved a collective $600 million.
However, as mentioned, since the IRA was enacted two years ago, the tax credit has spurred political debate.
For example, former Sen. Joe Manchin was instrumental in helping to pass the IRA in Congress but has since voiced concerns about how some of the law’s EV provisions have been implemented. Manchin at one point threatened to sue the Biden administration over the implementation of the credit.
Some of Manchin’s concerns regarding the EV tax break, which have been echoed by some other lawmakers, are that the incentive:
- Provides permanent foreign production of EV batteries in the U.S. supply chain
- Hampers domestic production of electric vehicle components
- Decreases the number of American jobs in the EV market (though there is no clear evidence to support this claim)
Supporters of the EV tax credit cite advantages. For example:
- Support for domestic manufacturing: EV credit rules reward manufacturers that source and assemble vehicles in the U.S. and North America
- More financially accessible to consumers: Data show EV sales have increased market share over the past few years. And now that the EV tax credit is available at the point of sale, eligible buyers can purchase certain EVs at a reduced cost rather than waiting to save when they file their federal tax returns.
- Environmental sustainability: Proponents argue that making EVs more affordable encourages consumers and helps reduce reliance on fossil fuels. The Biden administration set a goal of zero-emissions vehicles half of all vehicles sold by 2030.
For more information on the EV Tax Credit, see How the EV Tax Credit Works. Also for more on tax incentives in the Inflation Reduction Act, read Kiplinger’s report: Inflation Reduction Act Tax Credits: What You Should Know.
EV tax credit and the election
No matter what side of the political debate you're on, you may wonder why EVs have been controversial.
But perhaps electric vehicles should be a bipartisan issue. After all, wouldn’t it be better to have the option to purchase an EV (if you want to) with a tax credit than without one?
