Understanding The Electric Bike Tax Credit

Lawmakers are trying to combat climate change with an amendment to the Internal Revenue Code of 1986 with a tax credit for electric bike purchases. If the bill to add a tax credit for electric bikes passes, it could offer an attractive incentive to potential e-bike owners. The credit could subsidize the cost of a new electric bike and have bike enthusiasts choose an e-bike over a moped or a dirt bike with a gas motor. With innovative tax credits like an e-bike incentive, more people can do their part to lower their carbon footprint and address the looming climate change crisis. Here are some details about the tax credit and how to qualify.

Can You Write Off Your E-Bike?

The E-BIKE Act was introduced in February of 2021 in Congress in the House. Two Democratic Congressmen, Jimmy Panetta and Earl Blumenauer, drew up the bill that could lead to people swapping out their car for an electric bike for short trips of less than five miles. Currently, most buyers of electric bikes can't write them off in their taxes. The E-BIKE bill would allow more e-bike owners to get a tax credit at the time of their purchase.

The tax code right now does allow bike owners who use their e-bikes for their job to deduct some expenses on their tax forms. Bike messengers and delivery couriers may deduct the cost of their bike and their riding expenses each year if it's primarily for business use. Riders who use their bikes for their job may also be able to deduct maintenance, repair and other costs each year.

Electric Bike Tax Deduction Info

The proposed tax incentive detailed in the E-BIKE Act would give taxpayers who purchase an e-bike up to 30% back of the retail price in the form of a tax credit. The maximum dollar amount for the tax credit is $1,500.

Electric bike models that are priced at $8,000 or less would qualify for the proposed tax credit. The new bill would also add incentives to taxpayers who primarily commute via their electric bike. Employers could reimburse workers up to $600 each year if they commute via traditional bicycle or e-bike instead of car, bus, train or another gas-powered vehicle.

Are Electric Bikes Tax Free?

Since the E-BIKE Act is still in progress, electric bike purchases are not tax free. Electric bike purchases are subject to sales tax, depending on the state the buyer purchases the bike in. In some states, like Delaware and Montana, there isn't a sales tax on any purchases, so an e-bike may be a little cheaper. 

Unlike mopeds, scooters and other gas-powered vehicles, e-bike riders don't have to fuel up their bikes for a ride. Not using gas for riding means e-bike owners can save big on pricey gas taxes found at the pump.

Licensing, Tax, & Insurance of E-Bikes

New electric bike owners also have to be familiar with their state's laws regarding titling, licensing and insurance for e-bikes. Each state has its own classification system for motorized vehicles, like bikes. In some places, an e-bike is defined as a certain classification of motorized bike and requires drivers to have a license. Alabama, Alaska and New Mexico are states that require licenses, insurance and registration documents for e-bikes.

Other states may have updated their laws for e-bikes and reclassified them as separate from gas-powered vehicles. In Utah and Vermont, e-bike riders don't have to register their vehicles or have a driver's license to operate them. Bike riders also have to be aware of what the state laws allow for e-bike riding on park trails and off-road areas. 

The future of e-bike riding looks bright with a possible tax credit coming down the pipeline. The new tax credit could potentially lower the cost of owning an electric bike and make it a more affordable way to manage your daily commute.