Because President-elect Donald Trump and Republicans on Capitol Hill are likely to take those savings into account in tax discussions next year, prospective car buyers who are thinking about buying an electric vehicle may need to move quickly to receive a Biden-era EV tax credit of up to $7,500, according to legal and automotive experts.
According to Jamie Wickett, a lawyer at the law firm Hogan Lovells who focuses on federal tax policy, energy, and the environment, there is no doubt that there is a genuine possibility that the EV credit will disappear in 2025.
To lower the chance of the credit expiring, if you’re a consumer looking to buy an EV, I would definitely delay that until 2024, whether it’s through a lease or an outright purchase, Wickett said.
Through 2032, the Inflation Reduction Act provided federal EV tax benefits to consumers who purchase or lease new or used EVs, including plug-in hybrid and all-electric vehicles.
The maximum value of the credit is $4,000 for used cars and $7,500 for new ones.
By permitting dealers to pay the money up front at the time of purchase rather of waiting until tax season, the Individual Retirement Account (IRA), which President Joe Biden signed into law in 2022, also made it simpler for customers to access the savings.
Trump pledged to cancel the electric vehicle mandate
According to reports, the Trump transition team wants to do away with the EV credits in order to generate funds for a comprehensive set of tax cuts that Republicans are anticipated to pursue the next year.
Trump promised to repeal the mandate for electric vehicles throughout his campaign.
Tesla CEO and prominent Trump supporter Elon Musk has also asked for the credits to be discontinued, claiming that doing so will harm the EV manufacturer’s American rivals.
A spokesperson for the Trump-Vance transition, Karoline Leavitt, stated that the president-elect would fulfill his promise.
According to Leavitt’s memo, President Trump was mandated to carry out the pledges he made throughout the campaign after the American people overwhelmingly re-elected him. He’ll deliver.
The fate of the EV credit and the contents of a prospective Republican tax bill are both highly questionable, according to experts.
According to the Tax Foundation, it may cost roughly $7.8 trillion over ten years to extend a number of expiring income tax cuts and carry out other Trump campaign pledges, such as lowering taxes on gratuities, Social Security payments, and overtime pay.
That expense would be reduced by around $921 billion if all of the IRA’s green energy tax credits—including the EV credit—were repealed, it stated.
Waiting is ‘too big of a gamble’
Because plug-in hybrids are better for the environment and save money on gas, Laura, 44, of Charlotte, North Carolina, has been considering purchasing one for a number of years.
The $7,500 EV credit made the cars more reasonable, so she was preparing to purchase one, she added.
Laura, who requested that her last name not be used, is now in a hurry to purchase a 2025 Chrysler Pacifica Hybrid before the end of the year because she fears that the credit may expire. Considering Trump’s distaste for the EV credit, she thought it would be too risky to wait and purchase in 2025.
Laura has been told by local auto dealers that she is eligible for the entire $7,500 credit, which has some limitations based on factors like the buyer’s salary and the model of the car.
Without a doubt, there is a genuine possibility that the EV credit may disappear.
However, she claimed that dealers in her area don’t currently have many vehicles available, and they have informed her that this is because buyers are rushing to get EVs in case the tax cut expires.
According to her, dealers are hoping to have more inventory in the upcoming weeks.
Laura stated that without the tax benefit, she would not purchase the car.
“That changes everything [for me] if it’s not going to be in by the end of December 2024,” she remarked.
She worries that if any consumers purchase an EV in 2025 or later, Trump and the Republicans in Congress may attempt to reclaim the $7,500 tax credit retroactively.
Ironically, she claimed that their total contempt for the tax credit was what made her attempt to obtain an EV sooner.
Take advantage of a ‘known entity’
Ingrid Malmgren, senior policy director at Plug In America, a nonprofit that promotes the switch to electric vehicles, stated that she would advise people to utilize the tax credit while it is still a recognized institution.
According to the U.S. Treasury Department, the majority of customers have chosen to get the credit as a discount at the point of sale. In essence, the auto dealer gives customers an advance tax credit, which is subsequently reimbursed by the Treasury.
Even though the lease duration would coincide with Trump’s administration, consumers who sign a lease deal by the end of the year would be able to contractually lock in their savings over a multiyear lease term, according to Malmgren.
However, review the terms of the agreement. One warning, according to Wickett, would be if a dealer included a condition in the leasing agreement that stated the consumer’s monthly lease payments would go up if the tax credit were rejected.
By the end of 2025, he anticipates that Republicans will have passed a tax deal. Instead of shutting off the spigot retrospectively for all 2025 sales, such a measure would most likely phase off the federal EV credit in 2026 or 2027, according to Wickett.
“Nobody is certain,” he remarked. However, I believe it’s very obvious that the Republicans will manage to enact a significant tax reform.
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