Why You Should Buy An Electric Car Now: Tax Credit In Jeopardy?


Why should you jump on the purchase of an electric car right away?

For those who aren’t in the loop, the U.S. federal EV tax credit is looming for Tesla and General Motors. We’re talking about $7,500 off a new car if your tax situation allows it. We’d suggest checking with a tax professional to make the determination.

Tesla has already officially surpassed 200,000 electric vehicles delivered in the U.S. to date. The automaker is now approaching its last “free” quarter wherein customers can receive the full $7,500 rebate. After the next quarter, the savings dial down every quarter until the rebate disappears. According to our data and heavily researched estimates — which are adjusted when official quarterly data is disclosed — GM has sold 189,758 EVs. This means, in the next four months or so, the automaker will join Tesla in the sunset period.

If you live in Canada, you’re likely well aware that Ontario recently canceled its EV tax incentives and Tesla is now reportedly suing over the situation. In the U.S., the Trump Administration has already made it increasingly clear that they may do the same thing at any moment. Of course, Congress would have to approve it. The situation already presented itself and was thought to have already put the credit in a dire situation, but fortunately, it’s safe for the time being.

Nonetheless, we’ve seen a ton of legislation that rallies against the premise of electric vehicles and clean air. Additionally, Trump replaced on oil-friendly EPA chief with another that denies climate change. It’s not going to get any better anytime soon.

With that being said, taking advantage of purchasing an electric vehicle now and working out the specifics surrounding your current tax situation is a necessity. If you wait too long, that credit may either dwindle or vanish. So, if you’re on the fence, now’s the time to buy.

If you have any questions or concerns, hit us up in the comment section or at our site email.


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64 Comments on "Why You Should Buy An Electric Car Now: Tax Credit In Jeopardy?"

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It is fairly obvious to assume that a lot of people will buy Tesla now just to get the full tax credit. I wonder what impact the diminishing tax credit will have on the Model 3 sales next year. Will there be more than the standard 20% cancellation rate of the TM3 reservations?

That’s a major reason why I purchased my Model 3 in May instead of waiting. Since I wanted long range and premium package, it didn’t make sense to wait any longer. I’m looking forward to my tax credit next February.

First half of 2018 will be a race to see who can still get half credit. They will sell everything they can build even at half credit. And obviously this won’t impact sales in the rest of the world.

This all assumes that the fed credit isn’t killed. R’s tried doing it last Dec. They may try again later this month as the 2019 Fiscal Year budget has to be passed. And they might try again at the end of the year, when there is a traditional late December tax extender bill.

It is likely that the Dems will take over the House and gain a few seats in the Senate this November. Even if the Reps push something through before the end of the year, it could very well be reversed early next year. Fascinating times.

First half of 2019 will be even more interesting if Tesla releases the TM3 $35k version. If that happens, the diminishing tax credit will have very limited impact until the reservation queue gets considerably smaller.

While I agree in principle that could happen, Republicans currently have all three levers of government. Trump is at least nominally a Republican (although definitely a certified idiot). Something that passes when a party is in full control is difficult to reverse with partial control (see Obamacare).

That being said, if they take a bad shellacking this November, I took Republicans will be less likely to try to push something like that through.

Considering not all buyers qualify for the full credit (lower tax liability) I’m not sure the Model 3 will be as impacted. However, given that both GM and Tesla will have the credit phase out soon i hope the government changes the law to have a fair cutoff for all automakers so that foreign laggers don’t benefit with more credit than US cars after next year. I also think many other factors will increase demand over the next few years even if the tax credit phases out: Near term: 1. Make leases available, not just loan financing and cash purchases 2. Sell the Standard Range Model 3 and add more options (e.g. make the PUP upgrade optional, enable Track Mode for performance cars, improve autopilot more & add features over the air, etc) 3. Open up sales to Europe and Asia 4. As more buyers show their friends & quality improves the reviews should increase sales 5. If needed as reservations go down, advertise since some studies find that half of consumers don’t even know the benefits of EVs Next 5 years: 6. Complete the China (& eventually Europe) factory quickly to avoid 40% import tariffs (tho i believe Tesla… Read more »

That’s quite a list.

I have a comment regarding #5: Tesla has been quite successful without using the standard advertising channels. As Elon put it recently, it’s the word of mouth that sells Teslas.

I agree if they don’t know about EV benefits yet, they’ve been spending to much time listening to Infowars and Alex Jones. Now that they have finally put a mussel on him. Maybe they’ll get educated.

Wow! Great list.

I’ll throw out a couple of others:

*Turn on the Tesla Ride Sharing app (Uber competitor)
*Grow the Energy side of the business
*Add a less expensive vehicle in below the Model 3 (hinted at for 5 years out)
*Tesla Semi
*Recently Tesla had a mystical “That’s just what people know about” comment about their product line. Talk about a wildcard! It literally could mean anything.

Oh yea I figured Tesla Network like uber would be unlikely but that would definitely be a huge demand lever, for now I just counted level 4 autonomy as an achievable step.

I don’t think the Semi or Tesla energy will have a big impact on the car demand or profit (I think both are likely low margin and use up batteries that could be used on the higher margin vehicles), but those are great ways to use up extra battery cells in periods of lower car demand so as not to shut down production.

Also I meant to add that the used car market is going to be absolutely devestated by reliable EVs as production increases!

” foreign laggers don’t benefit with more credit than US cars after next year.”

It’s the US customers and the US environement that benefits, if more subsidized cars can get sold.

Luckily the credit slows down and doesn’t end at once, but looking at other examples of where the tax credits ended, you can see a large peak just before and a massive decrease once it ends. Georgia’s $5000 incentive endet in July 15 and sales dropped almost 90%, compared to June 2015.

The ending tax credit (in addition to two years of demand on a waiting list) is surely a big reason why the Model 3 sells that well in the US, despite the base model not being available.

I don’t think it will be a big problem for Tesla, since sales might go down, but only slowly and the rest of the world can easily catch up. If politicians ended the tax credit at once, the situation might be a lot different. 7500$ is a lot of money and soon we will have an example of what will happen after an abrupt end with Norways incentives ending.

In general we just have to accept that incentives can’t go on forever, but I think the US model with the incentives decreasing (the rest is totally stupid, but that’s a good idea), will lead to a more smooth break.

I wouldn’t worry about the reduced tax credit. The cars will get cheaper and better by then, negating any loss from the tax credit.

Which is the point of the credit.

I sort of hope they can the tax credit after next year (or at least rethink it). They will feel a lot of burn from Tesla this half as they have to pay about 180,000 tax credits just for Tesla at full $7,500 (up to 1.35B) and likely almost 1B first half next year with around 300,000 vehicles at reduced credit. I don’t think writers of the tax credit thought that EVs would ever be at such high production rates while the credit was in effect. I think it will lead to law makers reevaluating the credit very quickly.

Why do you hope that? It’s money going to a great cause creating a cleaner world. Keep it permanently and add a $7,5k tax on anything with a tailpipe.

Agree – start with $1000 tax on any tailpipe — and have that fund EVs.

As little as $100 tax on every new ICE would pay for the “loss” of $7,500 in tax revenue on each EV.

I don’t like how it phases out, and the amount is too high, it was set back when batteries were $500 to $1000 / kWh. I am saying to end it for all manufacturers once Tesla’s credit runs out and replace it with something fair to all manufacturers (not benefit late comers).

It should have been a set amount divided among all manufacturers to begin with. Say The first 2 million vehicles and then phased out over the next 2 million (1 mil half credit, 1 mil quarter credit).

I agree that the way it benefits the laggards and penalizes the leaders is unjust. It was probably easier to get it passed as blatant corporate welfare like that though.

Agreed, it was designed to spur initial investment, and while it did that in the past, now it will only reward the slackers.

It is obviously not that much to the US Congress as a bill was introduced last month to extend the EV tax credit indefinitely. I don’t the the new bill will pass either house, but it does have about 12 co-sponsors.

The average credit receive will be less than $7,500. The most common previous cars of a Model 3 buyers were 2 Hondas, Toyota Prius, Nissan Leaf, and BMW 3-series. The most plausible explanation as to why 4 out of 5 are non-premium/luxury cars is that many Model 3 buyers are stretching their budget; and therefore, many probably don’t have $7,500 in total income tax liability.

Not that the $2.3 billion would be a big deal to congress even if all Model 3 buyers could utilize the full tax credit.

It’s a shame Nissan doesn’t make a BEV. It’d be a nice addition to this article.

I bet if Nissan made a BEV, they would call it Leaf.

Nissan is not close yet to losing the tax credit and that’s why it is not mentioned.

I don’t think you understood what the article was about…

Just recind the tax credit after 2020 (and remote fossil fuel subsidies). That’ll be fair to Tesla and GM, and won’t drain the tax revenue.

The biggest subsidy that fossil fuels get is the right to spew toxic pollutants and climate changing greenhouse gases into the atmosphere. How do you get rid of that? Maybe add a carbon tax onto all fossil fuels?

And the second biggest is about 1/2 the outrageous US military budget, our last 3 wars were pretty much about access to oil, anyone who thinks otherwise is fooling themselves.

Depending on what you specifically consider a subsidy – I’d like you to meet hyper inflation. He’s happy to raise your food, heating and other costs by a substantial amount!

Would you mind explaining your hyper inflation comment?

Transportation and farming are two major subsidy takers. As soon as you increase the cost of fuel you increase the cost of goods – sometimes in a double whammy in the case of food (costs significantly more to farm, and then it costs significantly more to transport to markets). Electricity and heating costs would also go up by a large amount, as would public transportation (buses). Hyper inflation is perhaps a bit of an stretch, but increasing fuel costs could increase many household essentials by 10-20%+, which would obviously increase inflation significantly and cause major issues for people on low income. Outside of the developed nations many of fossil fuel subsidies are designed to reduce the cost of fuels and transportation to people on much lower incomes than us. In future this will likely transition to majority renewable and electric, but it needs to be done in a gradual, sustainable way as to not increase costs dramatically in a short space of time. Put it another way, if a government banned the sale of new ICE vehicles overnight the cost of a new car would double in that same period. Yesterday you could buy a Corolla for $20,000 – today… Read more »

Thanks, my only gripe with your comment was the usage of “hyperinflation”. As you say, that would be a bit of a stretch.

Here is an interesting article from the Economist (2013) on why hyperinflation should not happen in the US: https://www.economist.com/free-exchange/2013/03/14/fearing-the-worst. Ironically, some of the most important points are highly debatable today because of the instability created by the current political situation.

I assume he is thinking that Raising the cost of transportation (via a carbon tax or extra gas tax) of goods and agriculture would mean rising food and product costs to the consumers. However, those vehicles could be replaced by EVs which have lower TCO, so probably not a problem.

Agreed, it’s the transition period in the middle that’s the problem. Ev’s aren’t ready to take over yet, so wacking the price of fuel up multiple times it’s current price would have a big knock on effect on prices, rather than just EV uptake.

I’m feeling the tax credit crunch now and am still deciding. We have a Spark EV leased but will be returning it in early 2019. Meanwhile the credits are running out and/or congress may kill the federal credit for next year. So risk waiting, or buy this year? I’m not going back to a car without a plug, so a (supposedly) cheap gasser isn’t an option.

How’s Congress going to kill the credit next year? At the moment, they’re going to at least have a Democratic House and I doubt enough of them will rally together to kill it. Plus, even some Republicans in the House (e.g. Rep. Valadao) are from areas that are gaining an EV manufacturing presence and would thus benefit.

Let’s flip that house & senate and extend those tax-credits.

I really don’t think they should, not as they are anyway. They should change to something for all EVs that phases out over time or maybe something point of sale.

I agree. Doing something like setting the incentive to 5K for every car maker until the end of 2020, and then putting it on a nice sane slow phase-out of 1K every year until it completely sunsets by the end of 2025, and making a point of sale credit would be a much better reform.

This accounts for battery prices dropping, and by making it a point of sale credit, it will save up to another $500 in state taxes, and save a few hundred in loan carry-over costs instead of waiting for a tax refund (yea I know it can be done differently, but most folks don’t)

Sadly, won’t happen.

Right, because everybody knows that the money comes from blue fairies…

GOP certainly thinks so as they borrow money to subsidize tax cuts that predominantly go to the very rich and even richer corporations.

Exactly, repeal the corporate tax giveaway and the budget already looks much better and can easily support the tiny expenditure of the EV tax credit.

The money comes from taxes the taxpayer already paid and is getting back. Thought conservatives liked tax cuts?

Anything we can do to stop the insanity.
If Trump goes ahead with adding tariffs of $200 billion and possibly another $267 billion on China it’s crazy. Basically taxing American companies that built factories in China to produce goods for Americans. So these American companies will simply raise the price by the cost of the tariffs and the American consumer will either pay more or not buy.
Economy then goes down the toilet. Wow Trump’s a genius. Hahahaha

It doesn’t need to be extended, just tweaked. Make it refundable and usable over multiple tax years while also lifting the cap per manufacturer in favor of a system that sets the credit at a particular level for everyone that declines annually.

Is there a specific line on my 1040 2017 Taxes that I can look at to see if hypothetically I would’ve benefited from the full $7500 credit in 2017? In my case that same line item should be around the same dollar amount in 2018.

Is it line #44 “Tax” ?

Line 47 of Form 1040


note things are somewhat different with the late 2017 tax cut bill

Thank you!!

Why is it “Chevy Volt” but “Chevrolet Bolt”?

Do I see some kind of “bias” here? =)

Haha. Fixed.

We should start to sunset EV incentives on all EVs next year now that Tesla has reached its 200,000 mark.

It should be “you snooze, you lose” situation.

Of course, we should increase federal tax on gasoline at the same time to pay for the “infrastructure improvement” spending.

That depends if you just care about Tesla being a success, or about EV technology replacing ICE technology in the majority of vehicles.

Not that I think the incentive capping is necessarily fair – perhaps just not have the trailing off of the incentive at all, but then that may cause the entire system to be wrapped up earlier, disincentivising other later manufacturers from investing in EV’s.

“disincentivising other later manufacturers from investing in EV’s.”

Of course, they (those who choose not to jump in early) can die because they took the “wait and see” approach. This whole incentives was setup to reward the “early adopters” . Now that we are passing that phase, the late adopters are already enjoying the lower battery price created by the early adopters, so why should they get “rewarded” for jumping in late and “take less risks”?

This whole incentives was setup to reward the “early adopters” .

The way it was setup, it rewards the transition to EVs, separately for each manufacturer.

The early adopters are taking a chunk of the market for themselves, which is an incentive in itself.

Get rid of the incentives and the market will stall. It’ll be interesting to see how things change in Ontario now the $14,000 incentive has been removed.

Fair enough, I don’t like the cap and phase out structure either, but it would be much worse for EV adoption to do away with the credit right now. We still have a long way to go to approach parity with gas car prices.

I agree with the second part about raising the gas tax, but while the EV tax rebate is flawed, I would rather congress keep their hands off it, becuase those dimwits are only likely to make it worse.

> After this month, the savings dial down every quarter until the rebate disappears.

I would imagine you guys know that this isn’t how the credit works and that the full credit is good through the end of December, then halves every other quarter after that before full phase-out at the end of 2019…

Yes, for sure. It wasn’t clear. Should have said after the next quarter. I clarified the wording. Thank you!

Keep in mind that the original subsidy was roughly [200,000 x $7500] = $1.5B per qualifying automaker. (While the tax credit continues to run past 200,000 sales, keep in mind that not all EVs will qualify for the full $7500, nor will all buyers qualify for the full $7500 tax credit, so I think $1.5B is a fair estimate.)

By 2019, Tesla and GM will have hit the cap, while Nissan and Ford will be over halfway there. None of the other automakers are even close. So between Nissan, Ford, FCA, Toyota, VW, Honda, BMW, Daimler, Volvo, and Hyundai/Kia there should be at least $10B remaining of the original funds set aside. $10B / $7500 = 1.3 million EVs. Let’s just call it an even million so this change will be framed as budget positive.

So then: starting in 2019, the next million EVs (regardless of maker) should receive the tax credit, at which point the quarterly phaseout would begin for everyone.

Rational and reasonable. So not likely to happen.

Sad to say but none of this is going to change until 2021 at the earliest.

I think you also have to throw in Audi, Porsche. As the VW auto group appears to count as seperate manufacturers.

The answer is of course to have EVs that aren’t dependent on EV tax credits. I realize that with gasoline prices 2.5 to 3 times cheaper than for instance Western Europe, you have a dramatically other tipping point.