Electric vehicle tax credit to climb to $12,500 if Biden plan goes through

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White House officials say consumers will be able to save hundreds of dollars per year

Electric vehicles are set to snag consumers a larger tax credit. If all goes according to plan, the EV tax credit will grow from $7,500 to $12,500 under President Biden’s Build Back Better initiative.

The credit is part of a larger $555 billion fund that Biden has designated to tackle climate change, and the White House feels it needs the middle class’ buy-in on EVs to make that happen. In its estimation, the best way to do that is to “deliver substantial consumer rebates and ensure middle class families save money as they shift to clean energy and electrification.”

In an announcement, Biden’s team added that there’s also another carrot. Officials noted that buying an EV “will save the average American family hundreds of dollars per year in energy costs.”

Tesla, Honda, and Toyota vs. Detroit

For an EV to be eligible, the White House said it must be made in the U.S. and built by union workers. Those two elements are essential if a consumer wants the whole $12,500. Without those two components, the tax credit rolls back to $7,500. 

The “made by union workers” aspect is a thorn in the side of Tesla and foreign-owned automakers like Honda and Toyota. In the past, those companies have argued that Biden is favoring Detroit automakers by giving them an unfair advantage.

While buying an EV from a union-backed source may lead to more savings, consumers who buy a non-union manufactured EV are not at a total loss. While they won’t get the full $12,500 as things stand now, the proposal would allow Tesla, Honda, and Toyota EV buyers to receive an additional $500 for electric vehicles that are made with batteries built in the U.S.

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