As EV Tax Credits Expire, How Much Did They Save Americans?

With the federal clean-vehicle tax credit program set to expire, a recent analysis by Lending Tree reveals the substantial savings U.S. car buyers enjoyed on electric and plug-in hybrid vehicles in 2023. The insights shed light on the economic impact of these credits as their deadline looms.

The Impactful Year of 2023

In 2023, American consumers benefited significantly from federal tax credits designed to encourage the purchase of electric vehicles (EVs) and plug-in hybrid electric vehicles (PHEVs). According to Lending Tree's analysis, the total tax savings reached over $3.3 billion. This initiative aimed at reducing carbon emissions and promoting cleaner energy alternatives provided a substantial financial incentive for consumers transitioning to greener transportation options.

The state of California emerged as the most significant beneficiary, with residents securing approximately $1.1 billion in tax credits. This figure accounted for nearly a third of the national total. California's leadership in EV adoption is well-documented, supported by robust infrastructure and state-level incentives. Texans also made notable gains, with claims amounting to $267 million. Washington State followed, having the second-highest number of used vehicle credits claimed, contributing to a broader picture of regional adoption patterns.

On a per-capita basis, California led with 857 claims per 100,000 tax returns, further exemplifying the state's commitment to clean transportation. Washington followed with 571 claims per 100,000 returns. Nationally, the average credit for new vehicles was $6,709 out of the possible $7,500, while used vehicles averaged $3,392 of the $4,000 maximum. These figures highlight the financial leverage provided by the credits, which made the transition to EVs more accessible for a broad range of consumers.

While the tax credits were primarily claimed by purchasers, an alternative for consumers was leasing EVs. Leasing allowed for similar financial benefits without the same restrictions on battery materials and assembly locations imposed on direct purchases. This loophole meant that even vehicles manufactured abroad, such as the Fiat 500e, could be leased with the credit benefits passed on by leasing companies. This aspect of the program further broadened access to EVs, encouraging wider adoption.

As the deadline for these federal tax credits approaches, potential EV buyers have a limited window to capitalize on these savings. The requirement is to finalize a deal by September 30, without needing to take delivery of the vehicle by that date. This urgency has sparked a surge in interest, with consumers rushing to secure deals before the credits vanish. The conclusion of this program marks a pivotal moment in the U.S. automotive landscape, prompting questions about the future of EV adoption without such incentives.