The Biden administration’s tax credits for electric vehicles (EV) could end up costing taxpayers four times more than earlier estimates, with multiple manufacturers set to collect billions in such credits over upcoming years.
Among the many tax rebates in the Inflation Reduction Act (IRA) passed last year, one is specifically aimed at electric battery manufacturing. For each kilowatt-hour of U.S.-manufactured cell, a company will get tax credits worth $35. This is expected to cut down battery production costs in the country by a third.
An estimate made by the Congressional Budget Office (CBO) in August last year foresaw tax revenues lost from these tax credits amounting to $30.6 billion over a period of 10 years, with the figure including credits for solar and wind manufacturing as well.
EV Manufacturer Benefits, tax Credits
EV manufacturers are expecting big money from Biden’s tax credits program. Tesla is expecting $1 billion in battery tax credits for 2023. The company’s Nevada plant can grow to manufacture up to 500 gigawatt-hours of battery cells, which would come to $17.5 billion in tax credits.GM is expecting its credits to net $300 million this year. Ford estimates over $7 billion in credits during the three-year period between 2023 and 2026, after which the company expects the credits to grow.
The EV tax credits of up to $7,500 will be offered to U.S. citizens who buy certain electric vehicles or plug-in hybrids.
IRS Rule Change, Income Qualification, Expensive And Impractical Vehicles
On Feb. 3, the IRS and Department of Treasury changed the vehicle classification standard to see more vehicles qualify for EV tax credits, allowing vans, pickup trucks, and SUVs to get tax credits as well.To qualify for EV credits, the annual income of an individual must be below $150,000, and that of married couples buying a new vehicle need to be less than $300,000. For used vehicles, annual income must be below $75,000 for singles, and less than $150,000 for married couples.
But despite the Biden administration’s push to promote EVs, they still remain too expensive for many people. One survey found that 85 percent of drivers in the United States could not afford an electric vehicle.