Earlier this year, the E-BIKE Act proposed a tax credit for e-bikes.
In February, the US House of Representatives passed a bill proposing a 30% tax credit for the purchase of new electric bicycles in the US. The goal is to make it easier for Americans to afford electric bicycles, perhaps replacing car-driven miles with more efficient electric bicycles.
E-bikes are significantly more expensive than normal bikes, typically costing between $1,000 and $8,000. Additionally, they have the potential to replace car trips for a lot of people, which could help the fight against climate change. Researchers found that if 15 percent of car trips were made by e-bike, carbon emissions would drop by 12 percent.
There are other benefits for cyclists in the 1,600-page bill. Bicyclists or bike-share users would be eligible for pre-tax commuter benefits, similar to those who drive and park or take public transportation to work. Employees will be allowed to receive a bicycle benefit amounting to up to 30 percent of the parking benefit - currently equivalent to $81 a month, or less than $1,000 a year, for bicycling.
An accompanying bill was introduced in the US Senate in July, a necessary step for the legislation to pass in both chambers before it could become law.
Following its introduction, the House bill was sent to the House Ways and Means committee, and we are now seeing how some of the language has been reworked by the committee.
In the latest version of the White House budget deal, there is good news: the proposed federal tax credit for new electric bikes has survived the most recent round of Congressional bloodletting. Furthermore, it has been restored to its former glory of 30 percent, after the House of Representatives cut it to 15 percent.
The proposal remains crucial for a product that is still struggling to reach mass adoption. If the deal passes in its current form, e-bikes would be considerably cheaper for most Americans. Thousands of people around the country could see their transportation options change dramatically as a result.
E-bike purchases are eligible for a refundable tax credit of 30 percent, up to $1,500. All three types of e-bikes qualify for tax credits, except for those with motors more powerful than 750W. Since the credit is fully refundable, individuals with lower incomes will be able to claim it.
Certain citizens would be eligible to receive a 30 percent refundable tax credit if they purchased an e-bike under $4,000. If you make less than $75,000 as an individual or $150,000 as a joint filer, you may qualify for a $900 credit per bicycle. In Grist's opinion, the credit phases out as income levels increase, a way to loop in lower-income earners who have historically missed out on green incentives. This is a slight back down from the original proposal to refund bikes up to nine thousand dollars, but cutbacks like this helped get the bill through the House. Additionally, a monthly pre-tax benefit for bicycle commuters was raised from $20 a month to $81. Pretax benefits are meant to cover costs associated with using a bike, such as a membership to a bike-sharing program.
A tax credit would be quite a milestone for the industry if implemented, as lithium-ion batteries have just paved the way for an increasing use of e-bikes in recent years. There has already been standalone legislation introduced concerning e-bikes, including the E-BIKE Act in the Senate, which proposes tax credits for e-bike purchases. Proponents view the inclusion of these vehicles in the Build Back Better bill as crucial to combating climate change since they can replace some short-distance car trips.
Congress has been working slowly on a 30% tax credit for electric bicycle purchases. Despite showing much anticipated progress, the latest update to the proposed legislation reduces the potential size of the incentive.
It also uses the problematic "under 750 watts" language when defining which electric bicycles would qualify for the incentive. In most US states, e-bikes are allowed to have a maximum motor power of 750 watts, so 750W e-bikes are common from many manufacturers. To include all e-bikes currently legal in most of the US, the bill should read "not more than 750 watts".
In addition to the VIN requirement, the committee also included a provision requiring that e-bikes come with manufacturer-assigned vehicle identification numbers (VINs). These numbers would then be used to claim the tax credit.
In order to qualify for the credit, the MSRP must be under $8,000.
These changes are not binding, but they suggest a new direction for the bill. It is still a long way to go before the legislation can be passed in the US House and Senate, after which it will need to be signed into law by President Joe Biden.
Below is the exact wording of the House Ways and Means committee’s updated proposal:
- Taxpayers will be able to claim a credit of up to $1,500 for electric bicycles placed into service in the United States starting in 2022. Taxpayers may claim the credit for one electric bicycle per taxable year (two for joint filers). The credit phases out at $75,000 of modified adjusted gross income ($112,500 for heads of household and $150,000 for married filers), at a rate of $200 per $1,000 of additional income. Taxpayers may use either their modified adjusted gross income for the current taxable year, or their adjusted gross income from the immediately preceding year, whichever is lower.
- It is defined as an electric bicycle when it has fully operable pedals, a saddle or seat for the rider, and an electric motor that produces less than 750 watts of assistance, and does not provide assistance if the bicycle is moving faster than 20 miles per hour or only provides assistance when the rider is pedaling and does not provide assistance if the bicycle is moving faster than 28 miles per hour.
- A bicycle must be acquired for no more than $8,000 to qualify for the credit.
- To qualify for the credit, the manufacturer must assign each electric bicycle a unique vehicle identification number and report such information to the Treasury in a manner prescribed by the Secretary. In order to claim the credit, taxpayers must provide the vehicle identification number assigned to the electric bicycle by the manufacturer.
- Mirror code territories will receive payments from the Secretary for revenue lost as a result of this provision. To compensate non-mirror code territories for revenue lost from operating an electric bicycle credit comparable to that for mirror code territories, the Secretary shall make payments.
Through tax credits, the U.S. has spent about $10 billion subsidizing the purchase of electric vehicles over the past decade. However, not a single penny of that has gone to the world's most popular and fastest-growing electric vehicle - a dynamic people-mover more efficient than any Tesla or Nissan Leaf. The electric bicycle, of course.
However, under the "Build Back Better" spending bill, which passed the House last month and awaits action in the Senate, e-bikes could see federal support for the first time. There is a $900 tax credit for e-bikes among its more than 2,000 pages.