The $7500 EV Tax Credit Lives On in New Tax Bill

The $7500 federal tax credit awarded to buyers of new electric cars—a major incentive that plays an important role in making EVs price competitive with gasoline-powered vehicles—appears to have survived in the final version of the Republican tax bill now working its way through Congress.

The tax legislation axes many popular credits and deductions, as it seeks to at least partly offset slashes to corporate and other tax rates, and the $7500 EV tax credit had been among the cuts in the version of the bill passed by the House of Representatives. The Senate bill, however, maintained the EV tax credit, and Bloomberg is reporting that in the compromise legislation the credit is maintained.

That has to have automakers breathing a sigh of relief. Both U.S. and foreign manufacturers are betting big on EVs, pushed in part by emissions regulations. But—apart from Tesla—consumer demand has been tepid, and it surely would have cooled further with the sudden elimination of the incentive.

The tax credit does still fade out, on a manufacturer-by-manufacturer basis, once each automaker sells 200,000 EVs. So far, Tesla is the closest to that mark; research IHS Markit reported that the automaker sold a total of 127,000 Model S and Model X electric cars in the United States through August 2017.