Uncle Sam Wants You to Drive: 5 Tax Breaks for Cars in the U.S. Tax Code

It’s April 15. If you bought an electric car in 2013, you can claim a tax break today. If you bought a plug-in hybrid, you can get a tax break today. But if you don’t own a car and walk to work instead? Sorry, Charlie.

Drive too much? Congratulations, you get a tax break. Photo: ##https://www.flickr.com/photos/86530412@N02/8264919801/##Chris Potter/flickr##
Bought a shiny new electric car? Congratulations, you get a huge tax break. Photo: Chris Potter/Flickr

There’s a whole array of goodies in the U.S. tax code for drivers, the automobile industry, and oil companies. Here are the ABC’s (and the DE’s) of these tax-day gifts that help clog our streets with cars.

Alternative vehicle logistics. President Obama wants to extend the tax break for people who invest in properties involved in the production of advanced vehicles or the fuels they use. The Treasury Department argues that the $2.3 billion allocated for this incentive under the 2009 stimulus wasn’t enough, and that it didn’t reach more than two-thirds of eligible applicants.

Biofuels. You can get a dollar from Uncle Sam for every gallon of biodiesel you produce, though this is the last year for that one.

Car commuting and driving for work. The granddaddy of all tax incentives for driving is the $250 per month that car commuters can claim in tax-free income to cover parking expenses. Once you’re on the clock, your driving expenses are also eligible for a tax deduction. The IRS lets you write off 56.5 cents for every mile you drive for your job. As Turbo Tax’s fact sheet says plainly: “More miles, more money.” You can even write off trips to search for a job, see a rental property you own, or do volunteer work (though that one gets a lower rate). In some cases, you can even claim deductions for car washing and polishing.

Drilling. Oil companies can write off costs associated with drilling and for the amount of oil taken out of (“depleted” from) their wells. They also get a big thank-you from Uncle Sam for not exporting jobs to China. According to The Atlantic, those three tax expenditures alone will cost taxpayers $37 billion over the next decade. Despite repeated efforts to repeal these subsidies, including for deficit-reduction purposes, they live on.

EVs. The Obama administration announced last month that the tax incentives for alternative fuel vehicles aren’t big enough yet. The White House wants to increase the maximum tax credit for purchasing electric vehicles from $7,500 to $10,000 and broaden it to include a wider range of “advanced technology vehicles.” The reason? President Obama thinks putting a million of these cars on the road by 2015 would “reduce dependence on foreign oil and lead to a reduction in oil consumption of about 750 million barrels through 2030.”

You know what else reduces dependence on all oil, foreign or otherwise? Not driving. It’s also a great way to reduce wear and tear on roads, decrease congestion, and make places more economically productive. (Is there anything that not-driving can’t do?)

Plus, according to the Federal Highway Administration, zero-vehicle households are disproportionately low-income. Sixty percent of them have incomes under $20,000, compared with just 16 percent of the vehicle-owning population. Meanwhile, the affluence of the EV-owning population is off the charts: A recent survey of electric car owners found that 30 percent of them make over $200,000 a year [PDF]. So credits for EVs are fundamentally regressive.

Obama also wants to increase the maximum tax credit for advanced technology medium-duty trucks from $20,000 to $25,000 and to maintain the $40,000 benefit for heavy-duty trucks.

Fuel Tax. And while it’s not a tax-day thing, we’d be remiss if we didn’t mention the federal gas tax, stuck at 18.4 cents a gallon though improved fuel efficiency and inflation combined have reduced the value of the tax by 28 percent since 1997 [PDF]. Despite a widespread understanding of shortfalls in federal transportation funding, the political will to actually raise the gas tax is nearly nonexistent.

  • Brandon

    I disagree with incentives to purchase bikes since most people would likely just use them for recreation. I would rather see a credit to incentive bike commuting, or incentives to use a bike where you might have otherwise used a car.

  • Brandon

    I understand that tax rebates for biofuels and EVs is about the only politically viable things that could have some impact on emissions. But from a environmental, health, and quality of life perspective a punitive tax on carbon emissions would be much more effective. People who drive large trucks would pay more than people who drive small cars who in turn pay more than EV owners who in turn pay more more than transit riders. Cyclists and pedestrians would pay the least taxes. (in essence this acts as a tax break for poorer carless households). A benefit is that the Gov wouldn’t support any particular technology but only support results of lower emissions. while punitive taxes are the most unpopular they have been shown to be much more effective at changing behavior that tax rebates. People will try harder to avoid a penalty then they would to receive a benefit.

  • No discounts for drivers! None!

  • Baloo Uriza

    While there’s clearly some problems with the current system, that would royally hose me. I make $11/hour and 26¢/mi, covering a largely rural midwestern territory roughly the size of Massachusetts. I’m just clawing my way back into a career after years of sporadic employment and long term unemployment in Oregon. Your idea would rip self-sufficiency right out of the deathgrip I have on it right now.

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