Automakers to produce more EVs in general more affordable EVs, and EVs – whether BEV or PHEV – that are as efficient (getting maximum miles per kWh of the battery pack) as possible.
In the case of the EV tax credit it should motivate: Tax laws fundamentally are – and should be – designed to change the behavior of businesses and consumers. Federal tax credit amount then = A + B + C (The amount is capped at $7,500.)īelow is a table show sample calculations for 9 BEVs and PHEVs/ The Key Flaws of the Federal EV Tax Credit Formula + $417 per kWh of a battery pack in excess of 5 kWh $2,500 for a minimum of a 5kWh battery pack The IRS formula is based on the size of the battery pack measured in kWh and works as follows:
CHEVY VOLT RANGE CALCULATION HOW TO
How Does the Federal EV Tax Credit Formula Work?īefore diving more deeply into the flaws of the tax credit calculation and then how to fix them, let’s take a look at how the formula actually works. Secondly, the Hyundai Kona Electric (BEV) with a 64 kWh battery pack and 258 miles of range for a 4.03 miles to kWh efficiency ratio qualifies for the identical $7,500 tax credit as the Wrangler 4xe with only 1.2 miles of EPA range per kWh. Additionally, the Chrysler Pacifica Hybrid (a PHEV) with a slightly smaller battery of 16 kWh achieves one-third more range than the Wrangler 4xe – yet again, they both receive the same $7,500 credit.
But both PHEVs qualify for the same $7,500 tax credit, the maximum amount under the tax credit rules. And the starting MSRP for the Wrangler is about $9,000 more than the RAV4 Prime. In the example above, the new Jeep Wrangler 4xe PHEV, which uses a 17 kWh battery, achieves only 21 EPA miles of range versus the 42 miles of range for the Toyota RAV4 Prime with an 18 kWh battery. The formula, which is based on the size of an EV’s battery pack, rewards OEMs (and consumers) for using and purchasing larger batteries with no consideration to efficiency (EPA range/kWh) and price. The Qualified Plug-In Electric Drive Motor Vehicles (IRC 30D) tax credit – commonly referred to as the “Federal EV tax credit” has a number of flaws, but one of the biggest is the poorly-designed formula that determines the amount of the tax credit available for each BEV and PHEV sold in the US.
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