There’s good news on the local front on electric vehicle tax incentives and rebates in Virginia. The Virginia General Assembly approved HB 1979, which provides a $2,500 rebate for the purchase of a new or used electric vehicle. If the purchaser of an EV has an income that doesn’t exceed 300 percent of the federal poverty level, they can get an extra $2,000 on their rebate for a new EV purchase and an extra $500 for a used EV purchase.
The measure is now in the Virginia Senate where it’s currently waiting for a Finance and Appropriations committee hearing to determine if it will be funded.
Maryland’s $3,000 excise tax credit on EV vehicles and hybrids is still depleted for the fiscal year, but it may be funded again in the future.
There’s a standing $7,500 federal tax credit on qualified new electric vehicles and a reduced credit for many new hybrids.
Will There Be New Federal Electric Vehicle (EV) Tax Expansions?
The Biden Administration and congressional Democrats proposed an expansion of existing electric vehicle subsidies that would provide a $12,500 tax credit per union-made zero-emission vehicle assembled in the United States. The existing $7,500 tax credit would remain the same for non-union vehicles. This tax credit would still only apply to new vehicle purchases.
A Congressional Budget Office (CBO) estimate suggested the tax credit would cost an estimated $31.6 billion over the next decade.
The existing tax credit is only good for up to 200,000 vehicles, and both General Motors and Tesla have exceeded their cap. The expansion would remove the 200,000 cap which means people who purchase GMs or Teslas would qualify for the tax credit – with one important caveat.
The tax credit wouldn’t apply to vehicles with MSRPs of $80,000 or more, which would primarily limit Tesla but also companies like GMC (EV Hummers), Audi, Bentley, Porsche, Jaguar, Mercedes-Benz and other luxury auto makers seeking to increase their presence in the electric vehicle space.
Maybe the biggest change would be giving consumers the ability to apply the credit at point of sale instead of as a traditional tax credit. That means they could essentially discount their vehicle when they purchase it. Estimates suggest the tax credit could result in a consumer price drop of roughly a third.
There’s quite a bit of potential criticism that can be levied from both sides in the bill. Creating a much better incentive for union-made vehicles might offend Republicans and foreign automakers that don’t rely on union labor. The expansion would clearly be picking economic winners and losers by giving greater subsidies to U.S. companies that fall in line with the administration’s labor agenda. Both Honda and Toyota have already reacted negatively to the proposal.
The bill, of which the EV tax credit expansion is just one part, also has penalties for traditional fossil fuel producers. Some of those producers have significant presences or employ many workers in traditionally Democratic districts, which might make the entire package a hard pill for every Democrat to swallow.
Injecting labor into an environmental bill that’s intended to help reach Biden’s goal of having 50 percent of all vehicles sold in the U.S. be electric by 2030 might also strike some people as counterproductive.
There’s also a criticism from some lawmakers that EV tax credits generally go to high-income individuals who don’t need to have their environmentalism subsidizes by taxpayers. They argue that many auto makers have already committed to switching primarily to EV and hybrid manufacturing in the upcoming decades, so why should U.S. taxpayers be nearly doubling subsidies to encourage the inevitable?
You Can Make Use of the Credit Today, But Not on Pre-Owned Vehicles
Many electric vehicles and hybrids currently on the market still qualify for the $7,500 federal income tax credit. However, only the original registered owner of a vehicle can claim the tax credit. If someone tries to sell you on a pre-owned EV or hybrid by suggesting you could claim the tax credit, they are incorrect.
However, electric vehicles and hybrids are rapidly becoming a bigger part of the pre-owned vehicle market in Washington DC and Baltimore. Improvements in battery technology and efficiency have enabled modern EVs to exceed the life expectancy of past generation vehicles.
You can find a great pre-owned electric or hybrid vehicle in our inventory.
