Tax credits for electric vehicles (EVs) aren't new, but they're becoming more relevant and of interest to more people with the rise in adoption of EVs in the US. Thanks to recent legislation by Congress and President Biden related to tax credits and other provisions, some of the stumbling blocks that have held back EVs—such as price, driving range, battery charging time, and access to charging stations—are starting to fall away. The new legislation commits support and a lot of money to expanding the EV market, which is good news for buyers.
According to Bloomberg, the US has reached a tipping point in EV adoption. For the first six months of 2022, cars powered solely by electricity represented 5% of all new cars sold. Throw in plug-in hybrids (PHEVs), and we may reach 10% soon if we haven’t already. (Here's our explainer on the difference between EVs, HEVs, and PHEVs.)
Though related tax benefits have been included in earlier legislation, the Inflation Reduction Act of 2022, a slimmed-down version of the Build Back Better Act, was signed into law by President Biden in 2022. Some legislators call it the most significant piece of climate change legislation ever passed. And it continues to support tax credits for EVs, albeit with some proposed new restrictions announced on March 31, 2023, that may cut the original $7,500 tax credit in half.