There are lots of perks when you buy an electric vehicle. You save on gas and maintenance, get access to carpool lanes in some cities, and receive a healthy federal tax credit of up to $7,500. Those incentives convince lots of buyers to go electric, but the latest budget proposal from President Trump calls for an end to the federal tax credit.
The announcement of the potential cut came this Monday. The administration says eliminating the tax credit would save the U.S. government $2.5 billion dollars over the next ten years.
Depending on exactly which electric car you purchase, you might not be missing out on as much as you think if the tax credit gets eliminated. That’s because the credit already phases out gradually when a company sells 200,000 electric vehicles.
Both Tesla and General Motors hit that threshold last year. Those who purchased a Tesla starting on January 1 received only a $3,750 discount, which will drop to $1,875 for the six months beginning on July 1.
General Motors hit the threshold a bit later, so the drop to $3,750 happens on April 1 followed by a drop to $1,875 on October 1. Tesla’s tax credit disappears completely in January 2020 followed by GM in April 2020.
A congressional report from last November showed 57,066 taxpayers took advantage of the tax credit claiming a total of $375 million in 2016. Congress estimated that the cost of the credit would be $7.5 billion from 2018 to 2020, so there are still plenty of tax credits to potentially be claimed if the credit remains.
Before you go rushing out to buy an electric car before the credit disappears, relax. This is currently a budget proposal and it will have to pass congress before it is passed. The likelihood of that happening is very slim, so you’ll probably be fine waiting a bit longer if you’re thinking of buying an electric vehicle.
What isn’t going to change is the gradual reduction of this tax credit. While Tesla and General Motors are phasing down, there are still plenty of other electric vehicle choices that take full advantage of the tax credit for now.
Even though this specific proposal won’t likely be passed, EV tax credits remain an easy target when it comes time to balance the budget.