A few weeks ago, the Biden administration announced a very ambitious plan that seeks to transition the United States car market into more EV. The new plan by the White House is designed to create the necessary conditions that will ensure that 50% of all cars produced in the US by 2030 are electric. Many see this plan as overly ambitious. In fact, over the last few years, the penetration of EV cars has remained quite difficult.
So, the US government is putting in incentives to accelerate the transition. One of the reasons why most people have shied away from EVs is simply because of the costs. Compared to normal gas engine cars, EVs are relatively expensive. However, this will not remain so for long. As part of new tax incentives for the EV market, it could become cheaper in the future to buy an electric vehicle.
This will be done through a federal tax credit and it could see new customers save as much as $7,500 when purchasing a new EV. The tax incentives hope to make the cost of buying electric vehicles low and in the process boost the adoption of clean energy cars in the long term. However, not all EV models will be eligible for this new tax credit.
Hybrid cars that combine the use of electric batteries and regular fuel will not be included. Nonetheless, plug-in hybrids will qualify in certain cases and of course, all full electric cars will also be eligible. The US department of energy is also expected to maintain a running list of all cars eligible for this tax credit. The list will be updated regularly as newer EV models come in.
But for all its good intentions, the new tax credit is not a long-term strategy. The plan right now seems a bit limiting. This is because it will only apply for the first 200,000 plug-in EVs sold by each manufacturer in the US. This could mean that Tesla and General Motors, two companies that have done very well in the EV market, will already be locked out.
Other car makers including Toyota, Nissan, and Ford will see this as an opportunity to boost EV sales until they meet their quota. But how much money can you save with the new tax credit? Well, it depends on the model. For instance, if you decide to go for the BMW i3, you could save up to $7,500. A Subaru Crosstrek Hybrid, on the other hand, could save you around $4,500.
This difference is based on the battery pack that each car has. So, fully electric cars will attract a big tax credit while those that have a hybrid plug-in design will attract a lower credit. To claim your credit, make sure you file the Form 8936 a year after buying your qualifying EV. But it is important to note that the credit is not a cashback. It's simply a way to discount your overall taxes to the IRS. But the savings look quite decent.