With the current tax credits about to run out for some automakers, congress is starting the process of possibly expanding the program and lifting the 200k vehicle cap. Not only would this draft bill help sell new EVs, but the bill would also expand the program to help with used electric vehicles.

For those unfamiliar, the current EV tax credit program allows a reduction of up to $7500 in federal taxes owed, but only for the buyers of the first 200,000 electric vehicles from a manufacturer. Once the 200,000 sales are reached, the credit phases out over several quarters until it goes to zero. The manufacturer is never given funds by the federal government under this program, and the credit is not refundable (ex. the Earned Income Credit), so people who don’t owe taxes or owe less than $7500 benefit less from the program.

With GM, Tesla, and Nissan approaching the end of the tax credit, many are wondering whether it’s a good idea to reward the automakers who didn’t step up and build EVs first, while raising the tax bill of people buying from more established EV players.

The most recent draft bill proposes first to increase the number of EVs sold to 600,000 before phaseout begins again. This would allow 400,000 more vehicles with the full tax credit for automakers already up against the 200,000 limit. To make up for the cost some, the credit would be reduced to $7,000.

On top of supporting used sales, the EV tax credit would also be extended to those buying used EVs. While more complicated than the credit for new EVs, it would allow a maximum of $2500 for each sold. The used EV must be between 3x the credit amount and $25,000 to qualify, and the program phases out for higher incomes.

One great thing about encouraging used EV sales is that they’re more environmentally friendly. Instead of building a new EV to replace a combustion vehicle, an EV that has already been working toward its environmental breakeven (the point at which emissions savings outweigh the extra emissions of manufacturing it) gets to replace the ICE vehicle.

The other exciting thing is that increased demand for used EVs is likely to increase their resale values. This makes it more economical to repair them and keep them on the road than to throw the rest of the vehicle away when a battery pack ages.

We look forward to being part of this solution, whether or not this latest draft bill is successful.