The Biden administration’s push for cleaner cars is paying off, with EV buyers saving over $1 billion since January.
EV buyers in the U.S. are cashing in big, thanks to the Inflation Reduction Act (IRA). Since January 1, more than $1 billion in tax credits have been issued upfront to electric vehicle (EV) buyers, according to the U.S. Treasury Department and IRS. This incentive is a game changer, making it easier and cheaper for Americans to switch to EVs.
Before this year, EV buyers had to wait until they filed their annual tax return to claim the credit, which could be months or even a year after purchasing their vehicle. Now, these credits are available at the point of sale. Buyers can see up to $7,500 knocked off the price of a new EV and up to $4,000 off a used one, making these green cars more affordable than ever. This change is already paying off, with more than 150,000 new and used clean vehicles sold this year benefiting from the incentive.
Deputy Treasury Secretary Wally Adeyemo highlighted the significance of this milestone, emphasizing the IRA is working as intended. The upfront incentives have made EVs very price competitive, sometimes even cheaper than their gasoline-powered counterparts. This is crucial as the Biden administration pushes to reduce greenhouse gas emissions and promote cleaner vehicles. The goal is ambitious: half of all U.S. vehicle sales to be electric by 2030.
However, not all new EV models qualify for the federal tax credit. The IRA includes specific requirements, such as parts of the car needing to be manufactured in North America. The U.S. Energy Department keeps an updated list of qualifying automakers and models. Despite these restrictions, the demand for EVs continues to grow, showing a clear trend towards electrification.
The average price of new EVs has been dropping. In April 2024, the average purchase price was $55,242, compared to $44,989 for traditional cars. But with the tax credits applied, EVs can become a much more attractive option. The credits help bridge the price gap, making EVs a viable choice for more consumers.
Around 125,000 new EV buyers have opted to receive their tax credit as an upfront payment this year, covering 90% of qualifying transactions. Another 25,000 buyers of used EVs have taken advantage of the upfront payment option, representing 80% of qualifying transactions. These figures highlight the growing popularity of EVs and the effectiveness of the new tax credit system.
Despite the positive impact of the IRA, there are some critics. Senate Republicans have proposed measures to end the tax credits for EVs, arguing that they benefit the wealthiest Americans and cost taxpayers billions. However, the Treasury Department has implemented income and price limits to ensure that the credits do not disproportionately benefit the wealthy. For example, single and married taxpayers are ineligible for the new EV tax credit if their annual income exceeds $150,000 and $300,000, respectively. There are also price caps, with SUVs and smaller cars qualifying only if their sticker prices are below $80,000 and $55,000, respectively.
The push for EV adoption is part of a broader strategy to combat climate change. The Bipartisan Infrastructure Law has allocated $7.5 billion for the expansion of EV charging stations across the country, a critical step to support the growing number of EVs on the road. Although the rollout of these charging stations has been slow, the government remains committed to building the necessary infrastructure.
The $1 billion in upfront tax credits clearly indicates consumers are ready to embrace EVs when the price is right. The combination of financial incentives and ongoing efforts to improve charging infrastructure sets a promising stage for the future of EVs in the U.S.
