Wouldn’t it be great if the government gave us a tax credit when we bought an electric bike?
The EBIKE ACT or “Electric Bicycle Incentive Kickstart for the Environment” ACT is a provision in the Build Back Better ACT that gives you a 30% refundable tax credit on the purchase of an electric bike. The ebike has to be a class 1, 2, or 3, and cost $4,000 or less. This credit would phase out for individuals making over $75,000 or married couples making over $150,000.
2022 could be the year for you to buy an electric bike. Keep in mind that Build Back Better has to pass for this to go into effect. So keep your fingers crossed.
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How does the EBIKE ACT work?
The EBIKE ACT, as it stands now would give you a 30% tax credit on the cost of an electric bike purchased in 2022. The electric bike has to be a Class 1, Class 2, or Class 3 ebike and the motor can not exceed 750w of max power. They also want it to be an ebike you use in the United States.
So, what does that mean?
Well, here are the ebike classes –
Class 1 – pedal assist (no throttle) up to 20mph
Class 2 – pedal assist (with throttle) up to 20mph
Class 3 – pedal assist (no throttle) up to 28mph
All with a 750w motor or less
Almost all ebikes sold in the US are one of these 3 classes, and most motors are 750 watts or less. So, not to worry.
The other limitations of the EBIKE ACT are –
- It’s only for ebikes that cost $4,000 or less
- The tax credit amount will phase out if make over $75,000 (or $150,000 for married couples)
- The phase-out is $200 for every $1,000 over the limit you are. So if an ebike you purchase gives you back $900, but you make $80,000 a year, you would get bupkiss. ($0)
A realistic example would be if you were to buy a $3,000 ebike and you make less than $75,000 a year, you would still pay full price upfront but you would get an extra $900 back in your tax refund or pay $900 less if you owe taxes.
Who introduced the EBIKE ACT into congress?
The EBIKE ACT was first introduced in the House of Representatives by Congressman Jimmy Panetta (D-CA) back in February of 2021.
Then 6 months later it was introduced in the Senate by Senators Brian Schatz (HI) and Ed Markey (MA) in July 2021.
On September 11 it made it to the Build Back Better Bill, also known as the Reconciliation Bill.
When it was first introduced the EBIKE ACT gave you a 30% tax credit back, but as it stands now it’s 15%. Something is better than nothing.
What is the Bicycle Commuter ACT of 2021?
The Bicycle Commuter Act would reinstate the commuter benefits for biking to work that was suspended in 2017. The new benefit would offer commuters up to $81/month in pre-tax benefits for biking, including electric bicycle costs.
This would mean that you can set aside up to $81 a month before taxes to pay for your biking needs. This would apply to individuals making up to $75,000 a year.
The Act was introduced into Congress by Rep. Earl Blumenauer (D-OR) and if passed, would begin in 2022.
To break it all down –
Your employer would have to be enrolled in the program, and you could spend up to $972 tax-free on bike needs in a year.
Knowing tax brackets will differ, let’s assume your filing as a single for this example.
The 2022 tax brackets for single filers
- 10% tax rate for incomes less than $10,275.
- 12% tax rate for incomes over $10,275 but not over $41,775.
- 22% tax rate for incomes over $41,775 but not over $89,075.
Now let’s make the example for one year
With $81 per month, that’s $972 per year.
Here’s a chart of how much you need to make, to actually get paid $972 based on what tax bracket you are in –
| You’re paid | Tax % | You actually earned | savings |
| $972 | 10 | $1068.20 | $96.20 |
| $972 | 12 | $1088.64 | $116.64 |
| $972 | 22 | $1185.84 | $213.84 |
Based on your tax bracket, you actually earn a lot more than you are paid. It kind of sucks doesn’t it? But welcome to America.
That $81 a month can go a bit further if it’s not taxed.
We all do it, we work for a certain wage and get paid another wage.
Food For Thought –
Did you know that if you are single and work for $21/hr, 40 hours a week, all year long, then you make $43,680 per year and pay 22% – so you get paid $16.38/hr
But, if you work for $20/hr, 40 hours a week, all year long, then you make $41,600 per year and pay 12% – so you get paid $17.60/hr (that’s how tax brackets work)
If you are making $21/hr, ask your boss to pay you $20/hr.
You will be $2530 richer in a year, and that’s after taxes. That’s a free ebike!
At the end of the day
At the end of the day, these bills have to get passed first before any of us can benefit from them. Write your congressman and tell them to vote for the Build Back Better Bill and help get more people on ebikes.
Riding an electric bike gives you freedom of mobility like no other, but ebikes are not free, I wish they were.
There are good politicians in this country that are trying to help us out.
If this bill passes, be sure to take full advantage of these programs and show them that we need and use good legislation like this!