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The US House of Representatives passed President Joe Biden’s Build Back Better bill following huge changes to better incentivize electric car purchases. The legislation includes a refundable EV tax credit for up to $12,500 as a huge shift away from the currently non-refundable amount. Now, the bill heads to the Senate where it needs to pass before the changes become official. The Build Back Better bill includes a $12,500 EV tax credit, up from the current $7,500 available to qualifying cars and buyers. Its inclusion comes as the bill sheds multiple other elements to compromise with various Democrats. The base amount remains $4,000, as it is today, with another $3,500 available if the EV’s battery pack includes at least 40 kilowatt-hours of capacity. The gas tank cannot exceed 2.5 gallons in the case of plug-in hybrids. However, this is for cars placed in service before 2027, and now comes the $5,000 boost.

EVs and consumers will be able to qualify for another $4,500 in the tax credit if an automaker makes the EV in the US with a union workforce. Another $500 comes into play for automakers using a US-made battery, for a maximum of $12,500 available. Today, the only car that would qualify for anywhere near the full proposed credit is the Chevrolet Bolt EV and Bolt EUV. This provision would, notably, exclude Tesla and even the Ford Mustang Mach-E, since it’s assembled in Mexico. In other changes made last week in the House, Democrats increased the price cap for qualifying EVs. The new language allows for vans, trucks, and SUVs with a manufacturer’s suggested retail price of up to $80,000 to qualify for the $12,500 credit. Previously, the initial framework set a limit of $64,000 for vans, $69,000 for SUVs, and $74,000 for pickup trucks.

The Democrats also reduced income eligibility to claim full credit. Single filers with adjusted gross annual incomes of $250,000 or more, or joint filers with AGIs of $500,000, will not be eligible for the full credit. The dollar figures are down sharply from $400,000 for single filers and $800,000 for joint filers. The tax credit is currently a nonrefundable credit when you file your taxes. It means the government doesn’t cut you a check for $7,500 and all it does right now to reduce your federal tax bill. The latest version of the Build Back Better bill with new House language turns the EV tax credit into a refundable one. The change would move the tax credit much closer to a point-of-sale incentive, and with the right qualifying EV, buyers could receive a max of $12,500 back from the government for buying a battery-powered car.