Electric car federal tax credit may rise to $10,000 but won’t apply to Tesla

The White House is considering giving the electric vehicle market a significant boost by raising the maximum tax break for zero emissions vehicles, reports Detroit News.

A rise from the $7,500 federal tax credit currently available to a headline sum of $10,000 has been proposed in an analysis by the US Treasury. Were the new maximum tax break to be rubber-stamped, however, it would not apply to vehicles worth more than $45,000.

It means that buyers of cars currently offered by Tesla Motors – namely the Model S – and the new Cadillac ELR (which probably needs it most) would not be eligible for a tax break. The highly regarded Nissan LEAF, however, would be available for just $18,970, even before state incentives.

The format of the federal tax credit would also change under these proposals. Instead of filing for a tax credit on income taxes, electric car buyers would allow dealers to offer a rebate at point-of-sale, furthering encouraging indecisive car buyers to commit to electric cars.

While this is excellent news for consumers, automakers will also benefit, and the format of the tax credit would change. At the moment each manufacturer has a 200,000-vehicle cap on the number of cars it can sell with the offer of a federal tax credit. The US Treasury’s new proposals suggest that the cap be removed, although credit would be entirely phased out in 2022 after a reduction in 2019.

Hydrogen fuel cell vehicles – which Honda, Toyota and Hyundai will all launch within the next 18 months – would also be in line for more generous incentives, although figures haven’t been mentioned. The current credit is $20,000 for vehicles weighing more than 14,000 pounds and $40,000 for vehicles weighing more than 26,000 pounds. It is set to expire in 2015.

Increased tax credits would be expected to help President Obama reach his goal of “putting one million advanced technology vehicles on the road by 2015.” It is estimated that tax breaks for alternatively-fuelled vehicles could total $4.8 billion by 2024.