Democratic lawmakers introduced modified social spending and climate provision that increases the amount of an electric vehicle tax credit to $12,500 for more costly cars and recommends a reduced income cut-off for customers eligible for the credit. The House Democrats’ amendment extends the full tax credit to vans, sport utility vehicles, and trucks with a price tag of up to $80,000. The previous law had a credit ceiling of $64,000 for vans, $69,000 for SUVs, and $74,000 for trucks.
Individual taxpayers with revised adjusted gross incomes of about $250,000 or $500,000 for combined returns would be eligible for the full tax credit under the proposal. Individual submissions were limited to $400,000, and joint filings were limited to $800,000. The transportation industry is one of the greatest contributors to greenhouse gas emissions in the United States, accounting for over one-third of annual emissions. To tackle climate change, the move from gasoline cars to electric trucks and cars will be vital.
A $4,500 tax credit is included in the Democrats’ proposal when an electric vehicle is purchased from a unionized facility. The proposal would benefit manufacturers like Ford and GM, whose manufacturing employees are backed by United Auto Workers union.
Republicans have rejected tax breaks for people who buy electric automobiles built by union workers. The revised proposal, which is a component of President Joe Biden’s $1.75 trillion social as well as climate investment plan, would provide the electric car market with a significant boost. Electric car sales are likely to account for less than 4% of total vehicle sales in the United States this year, as per industry analysts. Democrats are hoping to wrap up talks on the president’s Build Back Better initiative this week. The bill could be voted on in the coming days in the House.
What is the electric vehicle tax credit?
Anyone who acquired a qualifying electric vehicle during the year is eligible for a tax credit under Section 30D of the Internal Revenue Code. It covers both passenger cars and light trucks. The Energy Improvement and Extension Act of 2008 gave birth to the credit, and the American Recovery and Reinvestment Act of 2009 amended it. The latter was responsible for the development of tax credits as many know them today.
Currently, you can get a tax credit of up to $7,500 if you record an electric vehicle purchase on your taxes for the year you bought it. So, if you bought an electric vehicle this year, in 2021, you’d be able to deduct the cost while paying your 2021 taxes the following year.