Tax Credit for Plug-in Electric Vehicles Still Available for Certain Models

By D'Angelo Gore

Posted on August 9, 2021

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Dozens of electric cars and trucks still qualify for a federal tax credit of up to $7,500 for buyers purchasing new plug-in electric vehicles. President Joe Biden misleadingly claimed that the Trump administration allowed the tax credit to expire, which, so far, is only the case for purchases of models made by Tesla and General Motors.

Biden made the claim in Aug. 5 remarks in which he talked about furthering U.S. investments in “clean” vehicles. He correctly noted that the Trump administration had rolled back fuel efficiency standards that were implemented during the Obama administration. However, he also suggested that then-President Donald Trump had eliminated Obama-era incentives for taxpayers to buy more fuel-efficient vehicles.

“Despite bipartisan support for consumer incentives, they also let the federal tax credit expire, penalizing autoworkers who were, at the time, selling the most electric vehicles in the world — in the United States,” Biden said.

We asked the White House which expired tax credit Biden was referring to, but our inquiry went unanswered. The president appears to have been talking about the Plug-In Electric Drive Vehicle tax credit — which was enacted in 2008 under then-President George W. Bush, expanded in 2009 under then-President Barack Obama, and still exists in 2021 for purchases of new qualifying vehicles.

Initially, the nonrefundable credit ranges from $2,500 to $7,500 per vehicle, depending on the capacity of the battery used to power the vehicle. The amount of the credit begins to phase out once a manufacturer has sold 200,000 qualifying vehicles in the U.S. The credit is fully phased out in the sixth quarter after the sales cutoff is reached.

As president, Trump did propose eliminating the tax credit in his budgets for fiscal years 2020 and 2021. His administration estimated that doing so would save the federal government more than $2.5 billion over 10 years. 

But Congress didn’t repeal the credit, as Trump wanted.

The Trump White House also was reportedly instrumental in having a provision extending the tax credit removed from a government spending bill in December 2019. The proposal, which was supported by a bipartisan group of lawmakers, would have authorized a $7,000 tax credit for an additional 400,000 vehicles per manufacturer.

At the time, the expansion would have particularly benefited Tesla and GM, which lobbied for its inclusion after those automakers had reached the 200,000-sales threshold in late 2018 and early 2019, respectively. Biden may have been thinking of those two companies when he said the Trump administration penalized “autoworkers who were, at the time, selling the most electric vehicles in the world — in the United States.”

But, for now, those are the only manufacturers whose electric or plug-in hybrid vehicles are no longer eligible for the tax credits.

According to lists maintained by the IRS and the Department of Energy, purchases of vehicles from dozens of manufacturers still qualify — including models made by companies such as Ford, Mercedes-Benz and BMW, which are all still well short of the 200,000-sales cap.

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