The Inflation Reduction Act, which passed the Senate this weekend, expands federal tax credits for electric vehicles. The bill removes a cap that prevents owners of popular electric vehicle manufacturers, such as Tesla and General Motors, from receiving the credit. It also expands the credit to used electric vehicles.
More than 7 million fully-electric or hybrid vehicles were registered in the US in 2021, according to data from the Department of Energy. Electric cars make up less than 4% of total passenger cars in the US. The federal government and some states provide tax incentives to individuals who purchase electric vehicles. These tax credits can add up to more than $10,000 in some states.
The Department of Energy defines electric-drive vehicles as those that “use electricity as their primary power source or to improve the efficiency of conventional vehicle designs.” From this definition, there are three major categories of electric vehicles: all-electric[1], plug-in hybrid[2], and hybrid[3]. Hybrid vehicles are the most popular, making up about 70% of all electric vehicle registrations in 2021.
